The Philippines WT/TPR/S/149 
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III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) INTRODUCTION  
1. Since its previous Trade Policy Review, in 19 99, the Philippines appears to have made little 
progress in pushing forward the economic reform a nd trade liberalization programme introduced in 
the 1980s.  However, the recent renewal of the Government's political mandate, combined with 
favourable economic growth, presents the Philippines w ith a unique opportunity to break with the past 
and pursue an agenda of economic reform.  By stimulating competition th is would improve the 
efficiency of domestic producers and their capacity over the longer term to compete against imports 
and in export markets.  It is crucial that the Ph ilippines seize this opportunity to reform its trade 
regime, which remains not just restrictive, but also  unpredictable and complex.  This undermines its 
transparency and leaves considerable room for ad ministrative discretion and non-market outcomes. 
2. Import barriers remain a major impediment to co mpetition in the economy and, therefore, to 
improved productivity of domestic producers.  Am ong the main import barriers is the tariff, which 
also remains a substantial, albeit declining, source of tax revenue.  In 2001, the planned reduction in 
applied MFN rates (to 0-5% by 2004 with some  exceptions) under the Tariff Reform Programme 
began to be at least partially rolled back, to "re- calibrate" rates and selectively raise some to promote 
industrial development.  This was largely in r esponse to political pressure from protected producers 
and other interest groups, and to reduce associated ta x revenue losses.  Many tariff rates that had been 
lowered were raised, especially from late 2003.  Thus , the simple average applied MFN tariff rate fell 
from 9.7% in 1999 to 5.8% in 2003, but rose to 7.4% in 2004;  this is still low by developing country 
standards.  The large gap between applied and b ound rates imparts a degree of tariff unpredictability 
as it provides substantial scope to raise applied tari ffs.  Tariff predictability is further undermined by 
Presidential discretion to raise applied MFN tari ffs to 100% when deemed necessary, possibly in 
breach of tariff bindings.  A number of general and sector-specific tariff exemptions remain.  Their 
curtailment would reduce the tariff's complexity and compensate for declining revenue from reduced 
tariffs.  All tariffs have ad valorem  rates, which importantly contributes to transparency and 
predictability.  
3. Non-tariff barriers to imports, especially licensing and permits, affect a number of goods, 
mainly for health or safety reasons.  Imports of some goods remain prohibited (e.g. native logs) and a 
few particularly sensitive goods (e.g. rice, and seemingl y fish and fish products) are subject to import 
quotas.  Furthermore, the President may prohibit im ports of goods from any country that discriminates 
against Philippine exports.  The related licensing sy stem is opaque and seems very complex.  New 
laws were enacted to regulate the use of con tingency measures based on WTO provisions.  National 
standards and technical regulations appear to fo llow international guidelines whenever possible, and 
the number of national standards that correspond to international standards has increased since 1999.  
Sanitary and phytosanitary regulations appear strict .  An Electronic Procurement System introduced in 
2001 has, according to authorities, made government procurement considerably more transparent and 
less costly.  However, foreign participation s till seems limited to when domestic goods and services 
are unavailable or to foreign-funded projects. 
4. Some items are subject to export prohibitions and other restrictions;  the President may 
impose export quotas on any goods.  Exports of suga r (and, until 2005, textiles and clothing) remain 
subject to special bilateral restrictions.  Export tax es apply only to plantation logs (20%), but it seems 
that they can be restored on a wide range of produc ts.  Such taxes, like export bans, can be distorting 
by implicitly subsidizing downstream processors.  Mi nimum export prices also seem to apply for rice 
and corn.  On the other hand, export support policies ex ist partly in an effort to offset the anti-export 
bias from restrictive import policies.  Several incentives support exports (e.g. duty exemptions, WT/TPR/S/149 Trade Policy Review 
Page 32 
 
 
drawbacks, export-processing zones, and tax relie f);  some of these are contingent on export 
performance.  Producers' export competitiveness would benefit from more cohe rent and predictable 
trade policies. 
5. Tax and non-tax incentives are used to encourag e investment in export-oriented activities, 
specific sectors, and less developed regions.  Tax incentives have contributed to low tax revenues.  
Inadequate internal tax revenues can constitute a barrier to cutting tariffs and may undermine the 
effectiveness of fiscal policy in achieving macr oeconomic stability and meeting the Philippines' 
developmental needs. 
6. Government intervention throug h ownership and regulation rema in important.  Privatization 
has been slow, and loss-making state-owned enterpri ses continue to be a considerable drain on the 
budget.  Privatization, accompanied by improved corporate governance, could enhance competition, 
thereby encouraging foreign investment and fostering long-term development.  There is no overarching competition law, but several laws and agen cies deal with competition;  this seems to be 
poorly coordinated and laxly enforced.  Likewise, while legislation to protect intellectual property 
rights is comprehensive, en forcement still appears weak. 
(2) M
EASURES DIRECTLY AFFECTING IMPORTS  
(i) Procedures 
(a) Registration and documentation 
7. Importers generally need to be registered (for a fee of PhP1,000) with the Bureau of Customs 
(BOC).1  Importers of specific goods (e.g. coconut products, coffee, fi sh products, logs and timber, 
plants, and sugar) require additio nal accreditation from other agencies, such as for SPS requirements.2   
8. All imports must be accompanied by a commercial invoice, bill of lading, certificate of origin 
(if requested), packing list, import licence (if require d), and a formal customs entry declaration form.  
Importers (or agents) must file import documents  with the BOC, which are processed using the 
Automated Customs Operating System (ACOS), installed in 2000.  Shipments are classified 
according to risk.  A low-risk shipment goes throug h the "green lane", a moderate risk through the 
"yellow lane" and a high risk through the "red lane".  According to the authorities, green lane 
shipments are generally not subject to inspection bu t are covered by "post-audit review", and can be 
cleared in four hours.  The BOC requires a docum entary review of goods channelled through the 
yellow lane, which can also be cl eared according to authorities in four hours;  red lane shipments 
require physical inspection and an average of two days for clearance.  The BOC has also added a 
"super green lane", for qualified importers, to provide immediate clearance.3  However, some 80% of 
imports are classified as red channel.4  Imports must be marked with their country of origin in an 
                                                      
1 Exceptions include importers in Special Economic Zones, the Government, its agencies and bodies, 
foreign embassies, and international organizations with diplomatic status and/or recognized by the Government, 
such as the Asian Development Bank and World Health Organization. 
2 These agencies include the Philippine Coconut Authority, the International Coffee Organization 
Certifying Agency, the Bureau of Fisheries and Aquatic Resources, the Department of Environment and Natural 
Resources for logs and timber, the Bureau of Plant Industry, and the Sugar Regulatory Administration.  
3 Registered importers that have not been subject to disciplinary action, nor imported prohibited items, 
and have paid all duties and taxes for at least one year. 
4 APEC (2005b), p. 21.  The auth orities indicate that this was due to serious smuggling problems and 
human resource constraints.  To help combat smugglin g, the Philippines is introducing mandatory examination 
of refrigerated containers. The Philippines WT/TPR/S/149 
 Page 33 
 
 
official Philippine language.  The Philippines pl ans to accede to th e WCO's Revised Kyoto 
Convention, but with certain reservations, in cluding full adoption of post-entry auditing.5   
(b) Preshipment inspection 
9. This was discontinued from 1 April 2000.6 
(ii) Customs valuation and rules of origin 
(a) Customs valuation 
10. In 2001, the Philippines adopted the transaction value as the basis for calculating the dutiable 
value of imports.7  If the transaction value cannot be determ ined, substitute methods provided for in 
the WTO Agreement on Customs Valuation may be used.  The Philippines invoked a transition period 
of three additional years to apply the computed value method, and reserved the right to reverse the 
order of paragraphs 3 and 4 of Annex III.8 
(b) Rules of origin 
11. The Philippines does not apply rules of origin to MFN imports.  Preferential rules of origin 
are applied under regional and bilate ral trade agreements.  The Phili ppines confers origin status under 
the ASEAN Free Trade Area to goods that have an A SEAN content of at least 40% of their f.o.b. 
value. 
(iii) Tariffs 
12. Tariff reform, initiated almost two decades ago,  seems to have stalled due to fiscal and 
industrial policy considerations.  At present, the tariff is being "re-calibrated" with a view to 
protecting "critical" industries (Chapter IV).  Tariffs have been raised selectivel y, especially since late 
2003, largely at the request of concerned industri es.  Section 401 of the Tariff and Customs Code 
(TCC) stipulates that concerned parties may request the Tariff Commission to modify rates.9  I n  
addition, in the interests of the economy, general welfare and/or national security, the President may 
raise, reduce or remove import duties (including classification changes) upon the recommendation of the National Economic and Development Authority (NE DA).  Rates may be lowered or raised up to a 
maximum of 100% ad valorem , in one or several stages, which could breach bindings, thereby 
undermining predictability.  The authorities mainta in that tariff increases have not breached WTO 
bindings. 
(a) Bound tariff 13. In the Uruguay Round, the Philippines bound 64.8% of all tariff lines:  99.5% of agricultural  
tariff lines (WTO definition) and 60% of non-agri cultural tariff lines.  Bi nding coverage varies 
substantially across HS sections, with sections incl uding vegetables, fats and oils, prepared foods and 
textiles, fully bound while others, including mainly  industrial products, have either no or a low 
incidence of bound items (Chart III.1).  Greater  coverage of bindings could increase tariff 
predictability.  All bound rates are ad valorem , and range  from 0% to 80%;  some 60% of all bound 
                                                     
 
5 APEC (2005b), p. 20. 
6 The contract with SGS expired on 31 March 2000 (WTO document G/VAL/W/63 , 31 March 2000). 
7 WTO document G/VAL/N/1/PHL/1, 5 October 2001. 
8 WTO document G/VAL/2/Rev.14, 25 April 2002. 
9 Philippine Tariff Commission (2003a). WT/TPR/S/149 Trade Policy Review 
Page 34 
 
 
tariffs are bound at rates below 45%.  Nevertheless , bound rates exceed applied rates, substantially in 
some cases, and this undermines predictability by  providing considerable scope to raise applied 
tariffs, as done selectively in recent years. 
0102030405060708090100
0102 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
TotalChart III.1
Share of bound tariff lines by HS section
Per cent
Source :   WTO Secretariat calculations, based on data provided by the Philippine authorities.Fully bound Partially bound
01 Live animals and prod.       
02 Vegetable products
03 Fats and oils      04 Prepared food, etc.05 Mineral products
06 Chemical and prod.07 Plastic and rubber
08 Hides and skins
09 Wood and articles10 Pulp, paper, etc.11 Textiles and articles
12 Footwear, headgear13 Articles of stones
14 Precious stones, etc.
15 Base metals and prod.16 Machinery17 Transport equipment
18 Precision instruments19 Arms and ammunition
20 Miscellaneous manuf.
21 Works of art, etc.
Note:      Calculations based on the 1999 tariff schedule in HS96 nomenclature (totalling 5,569 tariff lines).     
                Excluding in-quota rates.
 
(b) Applied tariff 
14. The Philippines tariff schedule had 10,688 eight -digit tariff lines in 2004, with rates ranging 
from 0% to 65% (including out-of-quota rates).  All tariffs are ad valorem, which enhances 
transparency, levied on the import's c.i.f. value.  The simple average applied MFN rate was 7.4% in 
2004. 
15. Reforms have been aimed at simplifying the tariff structure making it more uniform and 
reducing most rates to a range of 0% to 5% by 2001-04 (Box III.1).  However, the number of rate 
bands in the applied tariff in 2003 still compri sed 17 rates (16 in 1999), ranging from 0%-65%, and 
this was increased to 19 in 2004.  Most applied tari ffs range from 1%-15% (Chart III.2).  Changes in 
the distribution of applied rates since 1999 include:  an increase in duty-free lines and of lines bearing a rate of 1%;  a decrease in rates on inputs and intermediate goods aimed at assisting certain The Philippines WT/TPR/S/149 
 Page 35 
 
 
downstream sectors;  and a rise in the percentage  of lines bearing rates of 5%-10%, 10%-15%, and 
25%-30%.  In 1999, only three lines had rates from 25%-30% compared with 418 in 2004.  The share of duty-free imports fell from 56.9% in 1999 to 46.2% in 2003. 
Box. III.1:  Tariff reform 
In the early 1980s, the Philippines embarked on a medium-term struct ural reform programme with the 
objective of rendering Philippine industries more efficient and internationally competitive.  The two main instruments of the structural reform programme were the Tariff Reform Programme and the Import 
Liberalization Programme.  
The Tariff Reform Programme proceeded as scheduled from 1980 to 2001.  The reforms scheduled for 
2001-04 were intended to reduce tariffs to rates ranging from 0%-5% by 2004, with some exceptions for 
sensitive agricultural products, which would retain a tariff of 30%.  However, in 2002 the President announced that due to the budget deficit, tariffs coul d not be lowered.  Moreover, the President ordered a 
review of the tariff liberalization policy with a view to encouraging manufacturing.  In January 2003, the 
President announced that the unilateral tariff reduction programme was to slow down.  In addition, plans to 
support the agriculture sector and some crucial industries  (steel, textiles, and shipping) were formulated.  In 
2003, import duties on some raw materials, intermediate inputs, machinery and parts were reduced to 1%.  
This reduction was intended to assist domestic industri es to be globally competitive.  Also in 2003, tariffs 
on sensitive agricultural goods were increased to 35%-50%, and tariff rates that were scheduled to be 
reduced in 2003 were maintained at 2002 levels. 
The Philippines is undertaking a comprehensive review of the current tariff structure.  The aim of the 
review is to formulate rescue strategies for the agricultural, petrochemical, steel, textile, shipping and other 
critical industries rather than to simplify the tariff. 
Source : Philippine Tariff Commission (2003), A Primer on New Developments in Trade and Tariff Policy,  Quezon 
City. 
 
16. The average level of applied MFN tariffs declined from 9.7% in 1999 to 5.8% in 2003, but 
rose in 2004 to 7.4% (Table III.1).  This in part  reflected attempts to selectively assist troubled 
industries by at least partially rolling back the unilateral tariff reduction programme, especially from 
2003, when tariffs on 11% of tariff lines were raised , covering agricultural, fish, and industrial items 
(including processed foods, yarns, and fabrics) (Cha pter IV).  A striking feature of the 2004 applied 
tariff is the increased number of lines, which al most doubled from 2003.  The authorities indicate that 
a more product-specific nomenclature was required to facilitate trade negotiations.  This complicates 
the yearly comparison of simple averages as they could be biased either downward or upward.10 
17. Since 1999, the simple average tariff for agri cultural goods (WTO definition) has decreased 
from 14.1% to 10.3%.  Nevertheless, average protect ion for agricultural goods remains higher than for 
manufactured goods (Table III.1).  Grains, live animal s, and meat receive the highest protection.  
Grains is the only agricultural sub-sector in wh ich protection has increased substantially since 1999, 
from 22.4% to 29%;  protection has declined in most agricultural subsectors.  Non-agricultural 
products were protected by an average tariff of 9.1%, 5.1%, and 7.0% in 1999, 2003, and 2004 
respectively.  During the period under review, manuf actured goods such as textiles and clothing have 
                                                      
10 The 1999 tariff had 5,569 lines, the 2003 tariff 5,828 lines, and the 2004 tariff 10,688 lines.  Thus, 
the comparison of tariff averages may be misleading due to splitting of some tariff lines in sectors with high 
tariffs.  For example, in the 1999 tariff, transport equi pment had 156 lines with rates ranging from 3% to 40%, 
while in 2004 it had 1,003 lines with rates ranging from 1% to 30%;  however, during this period the average increased from 11.9% to 18.1%. WT/TPR/S/149 Trade Policy Review 
Page 36 
 
 
benefited from above average rates of protection.  However, protec tion to this sector has declined 
substantially since 1999. 
(5.3%).(15.9%)(6.3%)(17.4%)(0.38%)
(52.9%)
(0.1%)
(1.9%)
 (1.5%) (0.4%)  n.a.  (0.1%)  (8.9%)  (23.5%)  (62.5%)  (3.2%) 
 (2.3%) 
(0.0%)(13.2%)(22.5%)(53.1%)(3.7%)
(3.9%).
(1.2%)
05001,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,000
Duty free >0- 5 >5-10 >10-15 >15-20 >20-25 >25-30 >30
Figures in parentheses denote the share of total lines.    The 1999 tariff (5,569 tariff lines) is based on HS96 
nomenclature;  the 2004 (10,688 tariff lines) and the 2003 (5,828 tariff lines) tariffs are based on HS02 nomenclature.   
Calculations exclude in-quota rates.
WTO Secretariat calculations, based on data provided by the Philippine authorities.Number of tariff linesChart III.2
Distribution of MFN tariff rates, 1999, 2003 and 2004
Tariff rates
Note:
Sourc e:MFN 1999
MFN 2004MFN 2003
n.a.          Not applicable. 
 
 
Table III.1 
Structure of the MFN tariff in the Philippines 
(Per cent)  
  1999a 2003b 2004c Final 
boundd 
 Bound tariffe     
1. Bound tariff lines (% of all tariff lines) .. .. .. 64.8 
2. Simple average bound rate .. .. .. 25.7 
 Agricultural products (HS01-24) .. .. .. 36.5 
 Industrial products (HS25-97) .. .. .. 23.3 
 WTO agricultural products .. .. .. 34.8 
 WTO non-agricultural products .. .. .. 23.4 
 Textiles and clothing .. .. .. 28.0 
3. Tariff quotas (% of tariff lines) .. .. .. .. 
4. Duty free tariff lines (% of tariff lines) .. .. .. 2.3 
5. Non- ad valorem  tariffs (% of tariff lines) .. .. .. 0.0 
6. Non- ad valorem  tariffs with no AVEs (% of tariff lines) .. .. .. 0.0 
7. Nuisance bound rates (% of tariff lines)f .. .. .. 0.0 
Table III.1 (cont'd) The Philippines WT/TPR/S/149 
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  1999a 2003b 2004c Final 
boundd 
 Applied tariff     
8. Simple average applied rate 9.7 5.8 7.4 .. 
 Agricultural products (HS01-24) 14.8 10.2 10.6 .. 
 Industrial products (HS25-97) 8.9 5.0 6.9 .. 
 WTO agricultural products 14.1 10.0 10.3 .. 
 WTO non-agricultural products 9.1 5.1 7.0 .. 
 Textiles and clot hing 18.5 9.3 11.3 .. 
9. Domestic tariff "peaks" (% of all tariff lines)g 1.9 2.0 5.1 .. 
10. International tariff "peaks" (% of all tariff lines)h 23.1 2.0 7.5 .. 
11. Overall standard deviation of tariff rates 9.6 6.7 7.9 .. 
12. Coefficient of variation of tariff rates 1.0 1.2 1.1 .. 
13. Tariff quotas (% of all tariff lines) 1.3 0.9 0.6 .. 
14. Duty free tariff lines (% of all tariff lines) 0.3 3.2 3.7 .. 
15. Non- ad valorem  tariffs (% of all tariff lines) 0.0 0.0 0.0 .. 
16. Non- ad valorem  tariffs with no AVEs (% of all tariff lines) 0.0 0.0 0.0 .. 
17. Nuisance applied rates (% of all tariff lines)f 0.0 19.2 21.5 .. 
.. Not available. 
a Including Executive Order 63. 
b As at June. 
c Including Executive Orders 84, 295, 299 and 300. 
d Based on 1999 tariff schedule. e Calculations are only based on bound tari ff lines (64.8% of total lines).  Bound tariffs consists of 3,530 fully bound rates and 
 77 partially bound rates, representing respectively 63.4% and 1.4% of total lines. 
f Nuisance rates are those greater than zero, but less than or equal to 2%. 
g Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
h International tariff peaks are defined as those exceeding 15%. 
Note: The 1999 tariff is based on HS96 nomenclature and totals  5,569 tariff lines.  The 2003 and 2004 tariffs totalling respect ively 
5,828 and 10,688 lines are ba sed on HS02 nomenclature. 
 Excluding in-quota rates. 
Source:  WTO calculations, based on data provided by the Philippine authorities. 
18. The tariff shows a clear pattern of escalation in most industries, with higher tariffs on 
processed items than on semi-process ed goods and raw materials (Chart III.3).  The exception in 1999 
was the basic metal sector, in which semi-processe d goods continued to receive a higher level of 
protection;  in 2004 the exceptions are the food , beverage and tobacco, the non-metallic mineral 
products and the basic metal sectors.  In the la tter two sectors, semi-processed goods had higher 
tariffs, while in the food, beverages and tobacco sect or raw materials had higher rates of protection 
than semi-processed and final goods.  This seems consistent with the tendency to grant higher 
protection to agricultural than manufactured goods.  Nevertheless, the genera l pattern of protection 
has been intended to promote development of the manufacturing sector, which concentrates on the 
processing of parts and components.  This pattern  of protection has accentuated since 1999, with 
tariffs on certain inputs reduced  to assist specific sectors. WT/TPR/S/149 Trade Policy Review 
Page 38 
 
 
n.a.0510152025
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishing Chemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherChart III.3
Tariff escalation by 2-digit ISIC industry, 1999 and 2004
n.a.0510152025
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherAverage applied rate in manufacturing
(9.8%)
Not applicable.
Calculations exclude in-quota rates.WTO Secretariat calculations, based on data provided by the Philippine authorities.n.a.
Note:
Source :Per cent
First stage of processing Fully processed Semi-processedPer cent
Average applied rate in manufacturing
(7.5%)1999
2004
 The Philippines WT/TPR/S/149 
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(c) Tariff quotas 
19. Tariff quotas, with  in-quota rates ranging from 30%-50% and out-of-quota rates of generally 
5 to 15 percentage points higher, ranging fro m 35% to 65%, applied to 14 product categories 
(covering some 60 tariff lines) in 2004 (Table AIII.1 ).  However, several are currently inoperative 
following the lowering of the out-of-quota rate to equal the in-quota rate.11 
20. The system for administering tariff quotas still  seems complex, and this may deter imports 
(Box III.2).  A substantial number of tariff quotas ar e regularly unfilled;  more recently there have 
been no imports of live goats (HS 0104) and b eef (HS 0201), and utilization for live poultry (HS 
0105), pork (HS 0203), goat meat (HS 0204), poultry (HS 0207) has been less than three quarters. 
Box III.2:  Administrati on of tariff quotas 
The size of the quotas for agricultural products covered under the Tariff Rate Quota (TRQ) mechanism is 
based on Philippine commitments made during the Uruguay Round.  The tariff rate quota year runs from 
February to January.  Tariff quotas are allocated twice during the quota year.  In Fe bruary, the incremental 
quota for the quota year, the allocati on of the prior quota year, which has been recalled, and any portion of 
the quota not taken up during the prior quota year are put together in a Beginning Year Pool (BYP), which 
is apportioned to licence holders and new entrants.  In  July, the allocations surrendered or relinquished by 
licensees by end-May are put together  in a Mid-Year Pool (MYP), which is reallocated to other qualified 
applicants. 
In the initial year of implementation, products covered by the TRQ mechanism are classified into 
two types:  (a) goods that have been imported regularly and in substantial volumes during the representative period;  and (b) goods that have been imported irregularly or scarcely.  Allocation of 
licences is based on import shares for regularly imported agricultural products and on local output shares 
for irregularly imported products.  Under this system, a proportion of the licences are allocated to domestic 
producers.  Subsequent entrants are accepted on the basis of past imports. 
In the subsequent year, allocation is through a systematic distribution procedure (SDP) and then, if 
necessary, through a first-come-first-served distributio n procedure.  Under this system, the BYP and MYP 
are allocated as follows:  (a) priority access is given to licensees who have not surrendered any of their 
previous year quota, and have utilized at least 80% of their allocation (for BYP) and 30% by the last 
working day of May (for MYP), and qualified entrants;  and (b) any volume remaining in the BYP and 
MYP is distributed to interested applic ants on a first-come-first-served-basis.
  
Source :  WTO document G/LIC/N/3/PHL/4, 7 November 2001. 
(d) Variable levies and seasonal tariffs  
21. No variable levies or seasonal tariffs have b een applied since 1999, but provisions for their 
introduction still seem to exist. 
(e) Concessional entry and exemptions 
22. Sector-specific duty exemptions are provided for inputs under specific laws.12  G e n e r a l  
exemptions are also granted upon fulfilment of part icular conditions (Table AIII.2).  In addition, the 
                                                      
11 Includes certain items of poultry me at, coffee beans, and potatoes.  
12 These include the Agriculture and Fisheries Mode rnization Act of 1997, the Jewellery Industry 
Development Act of 1998, and the Philippine Fisheries Code of 1998. WT/TPR/S/149 Trade Policy Review 
Page 40 
 
 
President may, upon NEDA's recommendation, allow any imports to enter duty free if in the "interest 
of national economic development".   
(f) Tariff preferences 
23. Under AFTA the Philippines continues to exte nd significant preferential tariffs to products 
originating in ASEAN countries.  However, these pr eferences vary between members (Table III.2).  
Preferential rates are always higher on averag e for agricultural products (WTO definition). 
Table III.2 
CEPT preferential rates by member country, 2004 
(Per cent) 
  Overall simple average WTO agriculture WTO non-agriculture 
MFN 7.4 10.3 7.0 
CEPT preferential rates    
Brunei Darussalam 3.8 4.6 3.7 
Cambodia 6.3 9.1 5.9 
Indonesia 2.5 4.3 2.2 
Laos 4.8 7.1 4.6 
Malaysia 3.3 4.6 3.1 
Myanmar 3.6 6.0 3.3 
Singapore 2.5 4.2 2.2 
Thailand 2.5 4.1 2.3 
Viet Nam 3.0 5.3 2.8 
Source: WTO calculations, based on data provided by the Philippines authorities.  Excluding in-quota rates. 
(g) Other duties, fees, and taxes  
24. Most imports, like domestically produced goods, are subject to a value added tax of 10% 
(proposed to be raised to 12 %).  Exempt items  include:  agricultural and marine food products; 
agricultural inputs;  coal and petroleum products;  books, newspapers and ma gazines;  and passenger 
and/or cargo vessels of more than 5,000 tons. 
25. Excise taxes are still levied on alcohol products , automobiles, jewellery, minerals, perfumes, 
cigarettes, and petroleum (Table AIII.3).  Despite ef forts to reform the excise tax regime, few changes 
have been achieved since 1999.  Imported distilled sp irits are still subject to higher excise taxes than 
those produced domestically, although legislation to remove this discriminati on is being considered.  
The ad valorem  excise tax on motor vehicles, levied on the manufacturer's or importer's selling price 
(net of VAT), is no longer based on engine displace ment (rising with engine size) but was replaced in 
September 2003 with a progressive rate scale.  In prac tice, however, the incidence of excise taxes is 
still likely to fall heaviest on imported vehicl es, which are usually more expensive.  
26. Imports are also subject to various customs fees and charges for BOC services.13 
(iv) Prohibitions and restrictions  
27. Imports of certain goods are prohibited under th e Tariff and Customs Code (Table AIII.4) and 
various other laws.  In general, im ports of dangerous chemicals that are an unreasonable risk to health 
or the environment are restricted or prohibited.  Th e entry (or transit) of hazardous and nuclear wastes 
                                                      
13 Including import processing, administrative, and registration fees, and laboratory charges. The Philippines WT/TPR/S/149 
 Page 41 
 
 
is also banned.  Imports and consumption of halons was banned on 1 Ja nuary 1999.  Imported 
chlorofluorocarbons (CFCs) are allowed until 2009. 
28. Fish products may be imported only when the importation has been certified as necessary by 
the Department of Agriculture to attain food securi ty.  Imports, if allowed, require a per shipment 
permit or licence issued by the Bureau of Fisheries and Aquatic Resources  (BFAR).  Imports of live 
exotic species and live shrimp and prawn are prohibited on the basis of an "import risk analysis".14 
29. Imported used motor vehicles, which almost  equalled new vehicle sales (about 80,000 
annually), were subject to government review and approval up to 2002.  However, imports of used 
vehicles (except certain buses, trucks and special  purpose vehicles) were banned in December 2002 
including into Export Processing Zones, although implementation has been delayed pending the 
Supreme Court's decision on the ban's constitutionality (Chapter IV).  
(a) Import licensing   
30. Import licensing is intended, inter alia , to safeguard public health, national security and 
welfare, and to meet international treat y obligations regulating certain products.15 
31. The import licensing regime is regulated by the Tariff and Customs Code of 1978 
(Presidential Decree 1464), and by other laws gove rning the importation and licensing of specific 
commodities (Table III.3) 
Table III.3 
Goods subject to regulation/import licensing 
Commodity Type of regulation  
(e.g. licence, permit, prohibition, etc.) Purpose of regulation Government agency/issuing 
permit/clearance 
Dangerous drugs and exempt dangerous drug preparations .. To protect human health Dangerous Drugs Board (DDB) 
Precursors (various chemicals for 
the manufacture of dangerous 
drugs) .. To protect human health  DDB 
Diagnostic kits for drugs of abuse .. To protect human health   DDB 
Rice .. To ensure food security National Food Authority (NFA) 
Cyanide and cyanide compounds .. To safeguard public health 
and protect the environment Department of Environment & 
Natural Resources 
(DENR)/Environmental Management Bureau (EMB) 
Chlorofluorocarbons .. To protect the environment 
and fulfil obligations under 
international treaties DENR/EMB 
Asbestos .. To safeguard public health 
and the environment  DENR/EMB 
Penicillin and its derivatives  .. To safegua rd public health Department of Health 
(DOH)/Bureau of Food and 
Drugs (BFAD) 
Mercury and mercury compounds .. To safeguard public health 
and the environment DENR/EMB 
Table III.3 (cont'd) 
                                                      
14 Fisheries Administrative Order No. 207 of 2001, and Order No. 221 of 2003. 
15 WTO document G/LIC/N/3/PHL/4, 7 November 2001. WT/TPR/S/149 Trade Policy Review 
Page 42 
 
 
Commodity Type of regulation  
(e.g. licence, permit, 
prohibition, etc.) Purpose of regulation Government agency/issuing 
permit/clearance 
Colour reproduction machines .. To ensure nationa l security National Bureau of Investigation 
(NBI)/ Bangko Sentral ng 
Pilipinas (BSP)/Cash Department 
Various chemicals for the 
manufacture of explosives .. To ensure national security Philippine National Police 
(PNP)/Firearms and Explosives 
Office (FEO) 
Firearms, ammunition, and parts .. To ensure national security PNP/FEO 
Pesticides, including agricultural 
chemicals .. To protect human and plant 
health Fertilizer & Pesticide Authority 
(FPA) 
Motor vehicles (used), parts and 
components .. To ensure human safety Department of Trade and Industry 
(DTI)/Board of Investments 
(BOI)/Bureau of Import Services (BIS) 
Truck and automobile tyres and 
tubes, used, of all sizes .. To ensure human safety DTI/BOI/BIS 
All commodities originating in 
Socialist and other centrally 
planned economy countries .. To monitor and enhance trade Philippine International Trading 
Center (PITC) 
Commercial vessels and pleasure craft .. To ensure human safety and 
the protect the environment   Maritime Industry Authority 
(MARINA ) 
Coins, banknotes, and gold .. To ensure national security BSP 
Radioactive materials .. To ensure nationa l security Philippine Nuclear Research 
Institute (PNRI) 
Toy guns .. To ensure human safety and 
general welfare   PNP 
Video machines .. To ensure human safety and 
general welfare   Games and Amusement Board 
Used clothing .. To safeguard public health   Department of Social Welfare and 
Development 
.. Not available. 
Source : WTO document G/LIC/N/3/PHL/4, 7 November 2001;  and WTO (1999), Trade Policy Review:  The Philippines.  
32. Two licensing procedures exist, one for non-q uota goods and one for products subject to 
quotas.  Licences for non-quota goods are generally gran ted immediately, but applications must be 
filed at least two weeks prior to the loading date .  However, some non-automatic licences also seem to 
apply to these goods.16  All registered importers may apply for a non-automatic licence.  There is an 
additional registration requirement to import certa in goods, which, accordin g to the authorities, 
ensures that only qualified applicants obtain a licence.17  However, some goods (e.g. wood products 
and coal) subject to this additional requirement do not seem to be subject to licensing.  The licensing 
system is opaque and appears complex.  Licence fees vary by product and are collected by the agency 
granting the licence. 
33. Licences also administer import quotas (e.g. rice) and agricultural tariff quotas.  Regular 
licences are issued annually for tariff quotas at the st art of the quota year.  Special licences, which 
may have validity of less than a year, are issued  for quotas reallocated from the surrendered volumes 
during the quota year;  additional quotas created a nd then allocated by government in excess of those 
                                                      
16 It is unclear which products are subject  to automatic and non-automatic licences. 
17 These goods include game fowl, feed grains and feed grain substitutes, antibiotics, pesticides, 
fertilizers, wood products, and coal. The Philippines WT/TPR/S/149 
 Page 43 
 
 
committed;  and any remaining quota allocated on a first-come-first-serve basis.  Processing of special 
licences takes about one month. 
34. Imports of cereals seem ingly require a permit.18  This requirement was removed on corn, 
according to authorities, in 1995.   
(b) Import quotas 
35. Imports of rice are subject to quota.  It is unclear whether quotas on certain fish, crustaceans 
and molluscs still apply, as this  could not be verified.  
36. The Inter-Agency Committee on Rice and Corn, led by the Department of Agriculture, 
determines rice quotas.  Imports of rice are allowed to  the extent of the annual shortfall in production, 
which substantially exceeds the Philippines' mini mum access volumes committed under the WTO.  In 
principle, the National Food Authority (NFA) remains the exclusive importer of rice.19  While rice 
imports have been partially liberalized, the NFA re tains the first right to import rice after farmers 
(section (vii) below).  The rice quota was to be phased  out by 2005, but the Philippines is negotiating 
a ten-year extension within the WTO. 
(v) Contingency measures  
(a) Anti-dumping and countervailing measures 
37. New legislation (RA8752, 12 August 1999) regulating anti-dumpi ng and countervailing 
duties has been introduced since the last Review.20  According to the authorities the old laws 
contained WTO inconsistent provisions.21 
38. The anti-dumping/countervailing legislation is ad ministered by the Department of Trade and 
Industry (DTI) for industrial goods, and the Department  of Agriculture (DA) for agricultural products.  
After ensuring that applications are proper in form and substance and comply with documentary 
requirements, they determine whether a prima facie  case exists to conduct a preliminary investigation 
to assess whether provisional measures should be imposed.  The Tariff Commission (TC) conducts 
the formal (final) investigations and reports its decision on whether to impose definitive anti-
dumping/countervailing duties to the DTI/DA, whic h then issues a Department Order on the TC 
decision. 
39. To file a request on behalf of the domestic industry to initiate an anti-dumping/countervailing 
investigation, the petitioner must be supported by  a group of producers who collectively produce over 
50% of domestic output of the "like product", an d by producers who account for at least 25% of 
domestic production of the product alle ged to be dumped or subsidized.22  Under special 
                                                      
18 WTO document G/STR/N/4-7/PHL, 24 September 2002. 
19 WTO document G/STR/N/4-7/PHL, 24 September 2002.  
20 For details of the changes, see Philippine Tariff Commission (2001c). 
21 These provisions included withholding the release of imported items pending the determination of a 
prima facie  case of dumping/subsidization;  the imposition of provisional measures immediately upon finding a 
prima facie  case, effective up to the final determination of dumping/subsidization;  the inclusion of substitutes in 
the definition of like products; the application of country-specific anti-dumping/countervailing duties;  limiting the submission of replies to questionnaires to ten days; and the possibility of applying definitive anti-
dumping/countervailing duties retroactively. 
22 The petitioner must post a bond to cover any possible damages sustained by the importer from filing 
of a frivolous petition.  The bond is released only upon an affirmative preliminary determination. WT/TPR/S/149 Trade Policy Review 
Page 44 
 
 
circumstances, the DTI/ DA may self-initiate anti-dumping/count ervailing investigations provided 
they have sufficient evidence of dumping/ subsidization, injury, and a causal link. 
40. The anti-dumping duty imposed must equal the dumping margin, or less if such lower duty 
would be enough to remove the injury to the domestic industry.23  If a preliminary determination has 
been made, price undertakings may be agreed, af ter which the proceedings may be suspended or 
terminated.  A countervailing duty may be imposed equal to the ascertained amount of the subsidy, 
unless the DTI/DA has already accepted an undertaking from the foreign exporter, producer or government.
24  Decisions to impose a countervailing or anti-dumping duty may be appealed to the 
Court of Tax Appeals.  Any interested party also ha s the right to seek judicial review by the regular 
courts of anti-dumping/countervailing cases.  
41. Anti-dumping/countervailing duties are effectiv e for five years and may be extended 
following a further determination of their continui ng need.  This review may be initiated by any 
interested party or by the TC's own motion before the sunset date (i.e. the fifth year).  If the conditions 
requiring the anti-dumping/countervailing duty to be imposed have ceased, the TC should in principle 
recommend it be lifted.   The authorities indicate that th is has always been the case.    
42. During 1999-03, the Philippines initiated 13 anti-dumping investigations.  Final 
determinations were affirmative in five cases, one each against Indonesia, Korea and Russia, and 
two against Malaysia.25  It has not initiated any count ervailing actions during the period.26 
(b) Safeguard measures 
43. The Safeguard Measures Act (Republic Act No . 8800) of 2000 provides for the imposition of 
general safeguard measures, and a special safeguard measure on agricultural products.27  According to 
the authorities, this conforms to WTO provisions , except regarding the possibility of imposing a 
quantitative restriction as a provisional genera l measure on agricultural products (see below). 
General safeguards 
44. Domestic producers of "like or directly competitive products" or producers whose collective 
output constitutes a major proportion of total produ ction may file petitions for the imposition of a 
general safeguard.  The President, the House or Senate Committee on Agriculture, the House or 
Senate Committee on Trade and Commerce, and the DTI or DA may also file petitions.  They are to 
be filed with the DTI for industrial products and with the DA for agricultural products.  The DTI/DA 
determine whether petitions are proper (in form and substance) and comply with documentary 
requirements. 
45. Several government agencies are involved in a saf eguard investigation, which entails four 
steps:  determination of the existence of a prima facie  case;  preliminary determination;  formal 
investigation;  and final determination.  
                                                      
23 WTO document G/ADP/N/1/PHL/2, 21 September 2001. 
24 WTO document G/SCM/N/1/PHL/2, 26 September 2001. 
25 Goods affected were float and drawn glass (Indonesia and Malaysia), polypropylene resin (Korea), 
cold-rolled steel sheet and coil (Malaysia), and billets (Russia). 
26 WTO documents series G/SCM/N/52, G/SCM/ N/56, G/SCM/N/62, G/SC M/N/68, G/SCM/N/75, 
G/SCM/N/81, G/SCM/N/87 , G/SCM/N/93, G/SCM/N/ 98, and G/SCM/N/106. 
27 Philippine Tariff Commission (undated). The Philippines WT/TPR/S/149 
 Page 45 
 
 
46. The DTI or DA must determine whether a prima facie  case exists to initiate a general 
safeguard investigation.  If no case exists, the applic ation is denied;  if it is established, the DTI/DA 
initiates a preliminary investigation and has 30 days (from receipt of the properly documented 
petition) to make a preliminary determination of ser ious injury to the domestic industry.  If the 
preliminary findings are negative, the investiga tion should be terminated, which according to the 
authorities always occurs.   In case of a preliminary affirmative finding, a provisional safeguard 
measure may be applied.  This  could take the form of an ad valorem  and/or a specific tariff increase, 
which, according to authorities, is always paid th rough a cash deposit.  For agricultural products, the 
authorities may apply a quantitative restriction where increasing the tariff is considered insufficient to 
redress or prevent serious injury.  However, this has not occurred as no general safeguard has been 
imposed on agricultural goods since 1999. 
47. The preliminary affirmative findings are tr ansmitted to the TC to undertake a formal 
investigation.  It has to establish, inter alia,  the presence and extent of serious injury or threat thereof 
to the domestic industry, and a causal rela tionship between this and increased imports.28  The formal 
investigation must be concluded and a report submitted to DTI or DA within 120 days of receipt of 
the request.  Upon a positive determination, the TC recommends an appropriate definitive measure.  If 
the DTI/DA agrees with the determination, a general safeguard measure may be applied.29  In case of 
a negative final determination or if the cash depos it is in excess of the definitive duty assessed, the 
cash deposit or the remainder thereof is returned.  The TC must conduct an investigation if requests 
are made for the extension and re-application of safeguard measures, their reduction, modification 
and/or termination.  After a safeguard has been term inated, the TC is to evaluate the effectiveness of 
the actions taken by the domestic industry to ad just to import competition.  To date no such 
evaluations have been made since no safeguard actions have been terminated (Table III.4). 
Special safeguards 
48. A special safeguard may be imposed on specifi c agricultural goods marked in the Philippines 
Schedule when the imported volume exceeds its trigger le vel or when the actual c.i.f. price falls below 
a trigger price level.30 
49. A petition to impose a special safeguard measure may be filed with the DA by any interested 
party.  The DA may also self-initiate the imposition of a special safeguard measure.  To impose a 
safeguard, the DA must verify whether, in a give n year, the commodity's cumulative imports have 
exceeded its trigger volume or, but not concurrently, whet her its c.i.f. price is below its trigger price.  
Injury determination is not an element in th e imposition of special safeguard measures.   
                                                      
28 To determine serious injury or threat thereof,  the TC considers all relevant economic factors, 
including:  the rate and amount of the increase in imports in absolute or relative terms;  the share of the domestic market taken by the imports;  changes in the level of sales, prices, production, productivity, capacity utilization, 
inventories, profits and losses, wages and employment of the domestic industry;  significant idling of production 
facilities in the domestic industry including the closure of  plants or under-utilization of capacity;  inability of a 
significant number of firms to carry out domestic production at a profit;  and significant unemployment or 
under-employment within the domestic industry.  The investigation also needs to determine whether the domestic product is a like product or a product directly competitive with the imported product under 
consideration, and whether imports have increased (absolute or relative to domestic production). 
29 The authorities indicate that the right of the DTI to overturn a negative TC finding is under court 
appeal following the cement decision.  In  this case, the DTI overturned a TC determination that safeguards were 
not warranted as imports had not caused "serious" injury, and introduced specific import duties equivalent to 
80%.  
30 See WTO document G/SG/N/1/PHL/2, 9 July 2001 for goods eligible for special safeguards. WT/TPR/S/149 Trade Policy Review 
Page 46 
 
 
Table III.4 
Safeguard actions, 1999-04 
Product Investigation 
initiated Termination of 
proceeding Provisional duty Definitive duty 
Ceramic floors (HS 6907.9000) 
and wall tiles (HS 6908.9000) 27 June 2001   9 January 2001 23 May 2002a 
Gray Portland cement 
(HS 2523.2900) including 
Pozzolan cement (HS 2523.9000) 27 June 2001  10 December 2001 16 July 2003 to 
23 March 2004 
(reduction) 
Tomato paste (HS 2523.9000) 26 November 2001 26 December 2001 n.a. n.a. 
Glass mirrors (HS 7009.9100 and 
7009.9200) 16 April 2003  13 October 2003 7 June 2004 
Figured glass (HS 7003.1290 and 
7003.1990) 16 April 2003  13 October 2003 7 June 2004 
Float Glass (HS 7005.2190 and 
7005.2990) 21 May 2003  13 October 2003 7 June 2004 
a Safeguard duty extended for th ree years from 12 January 2005. 
n.a. Not applicable. 
Source : WTO document series G/SG/N/-/PHL/-, 3 July 2001 to  January 2005;  and the Philippine authorities. 
50. If a special safeguard is to be imposed b ecause of an increase in import volumes, the duty 
may not exceed one third of the product's out-of-quota tariff rate.  However, if the safeguard is based 
on price the duty imposed is based on the difference between the c.i.f price and the trigger price.  
Special safeguards may be maintained for one year and may not be used concurrently with general 
safeguard measure. 
51. The Philippines imposed six speci al safeguards based on price31, in 2002 and one on 
volume.32  The authorities indicate that there is currently  only one special safeguard measure, a price-
based measure on chicken and chicken products  (HS 0207.14.92), which was reinstated in 
October 2004 after being lifted in May 2004.  The price-based measure on imports of onions, which 
was reinstated in December 2004 after being lifted in December 2002, was removed in January 2005.  
(c) Other measures 
52. The President may impose an additional ad valorem  duty not exceeding 100% on goods 
partly or wholly originating in or transported in  a vessel of any country that discriminates against 
Philippine exports.33  If discrimination persists or increases after the duty is imposed, the President 
may prohibit the importation of goods originating in or transported in vessels of that country, if in the 
national interest.  This measure has not b een used during the period under review.  
                                                      
31 Goods affected were onions and shallots, fresh or chilled (HS 0703 .10.00) (WTO document 
G/AG/N/PHL/28, 23 September 2002);  meat and offal of certain fowls (HS0207.11.20, HS0207.12.20, 
HS0207.14.12, HS0207.14.92; and HS1602.32.90) (WTO document G/AG/N/PHL/29, 8 October 2002). 
32 Goods affected were meat and offal of certain fowls,  prepared or preserved in airtight containers (HS 
1602.32.10) (WTO document G/AG/N/PHL/30, 9 October 2002). 
33 The authorities define "discrimination" as the unequal treatment of Philippine trade vis-à-vis that 
with other countries in the application of laws, administrative regulations and practices, customs procedures, duties and charges, and the classification of goods. The Philippines WT/TPR/S/149 
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(vi) Standards and other technical requirements 
(a) Standards, technical requirements, and certification 
53. The Bureau of Product Standards (BPS), a governmental body under the DTI, remains 
responsible for developing  and implementing Philippine  National Standards (PNS).34  These are based 
on international standards whenever appropriate.35  The authorities indicate that not all PNS are 
aligned with international standards due mainly  to "long standing business practices", climatic 
conditions, no specific international standards, and th e need for higher requirements than international 
standards.  At end October 2004, there were 3, 755 PNS, and the share that is aligned with 
international standards had increased to 75.7% , from 47% in December 1998.  The Philippines hopes 
to achieve 95% alignment by 2010 and full alignment by 2020.36  Standards are set by technical 
committees (consisting of academics, trade and i ndustry associations, consumer groups, members of 
professional groups, research institu tions, government agencies, and testing institutions), and are 
revised periodically.  Ten industrial areas are being targeted as priority areas for establishing new standards;  the intention is to establish 1, 000 new standards annually from 2004 to have 
10,000 standards by 2010.
37   
54. PNS are voluntary, unless declared mandatory through Department Administrative Orders 
(DAO).  There are 91 mandatory  PNS (i.e. technical regulations), which apply, inter alia,  to:  
automotive and motorcycle batteries,  electrical wires and cables, fire extinguishers, household 
appliances, lighting fixtures, matches, medical e quipment, Portland cement, pneumatic tyres, and 
sanitary ware.  These products are subject to local  inspection to assess compliance.  Importers of 
products covered by mandatory PNS are issued an  Import Commodity Clearance (ICC) after the BPS 
has determined that imports meet the relevant Philippine standard.38  Nevertheless, imports, including 
those certified abroad as meeting international standard s, may be subject to sample testing by BPS;  
non-compliant imports are denied entry.39  BPS also conducts random checks at retail outlets to ensure 
that imports consistently meet Philippine standards.   
55. The BPS implements two certification schemes, the Philippine Standard (PS) Quality Scheme 
and the Safety Certification Scheme.  Under th ese schemes, the BPS issues a licence to allow a 
company to affix the PS Quality and/or Safety Mark to its products, after inspec tions to determine that 
such products meet the relevant PNS.40  The BPS also enforces/implem ents a maintenance scheme for 
its PS Quality and/or Safety Mark Licensees by regul arly monitoring and surveying products.  Foreign 
companies may also apply for PS Quality and Safety Certification through a BPS recognized 
counterpart National Standards Body (NSB) or an inspection and/or certification body.  At 
end October 2004, 25 firms from Indonesia, Japan, and Malaysia had been awarded the PS Mark. 
                                                      
34 Bureau of Product Standards (undated). 
35 As a member of the International Organization for Standardization (ISO), the BPS also participates 
in the development of international standards.  The BPS is also the WTO national inquiry point. 
36 APEC (2005b), p. 19. 
37 APEC (2005b), p. 19.  These are wearables, home furnishings, construction materials, food and food 
products, electrical products and elect ronics, information technology, motor vehicle parts, giftware and holiday 
decors, organic and natural products, and marine products.  
38 Department of Trade and Industry (2004d). 
39 Department of Trade and Industry (2004a). 
40 Over 70 products are covered by the PS Mark, in cluding air conditioners, batteries (automotive and 
motorcycle), small power transformers, brake fluids, cemen t, circular lamps, cooking ranges, electric fans, fire 
extinguishers, flat irons, fuses, LP G cylinders, lamps (circular/fluorescent), lamp holders, and matches. WT/TPR/S/149 Trade Policy Review 
Page 48 
 
 
56. The BPS Laboratory Accreditation Scheme (BPSL AS) covers the accreditation of testing 
and/or calibration laboratories.  Under the schem e, the BPS assesses conformance of laboratories' 
quality management systems with international guidelines.41  The BPSLAS has accredited some 
42 laboratories.  The BPS also offers third party tes ting of products through the BPS Testing Centre to 
verify conformity to buyer seller specificati ons.  The BPS Testing Centre performs electrical, 
chemical, and mechanical testing of products primar ily to support the PS mark and ICC certification. 
57. The BPS has been actively invo lved in establishing mutual recognition agreements within 
APEC and ASEAN, and at the bila teral level.  As at October 2004, the Philippines had made some 
69 notifications to the WTO Committee on Technical Barriers to Trade. 
(b) Sanitary and phytosanitary measures 
58. The Philippines' sanitary and phytosanitary regi me seems strict.  Imports of agricultural 
products, live animals, plants, fish, their products  and by-products must be accompanied by a sanitary, 
phytosanitary or health certificate from the country of origin, and are subject to inspection upon arrival.
42  An additional import permit is required for meat and meat products, fish and fish products, 
and for all agricultural products.  The Bureau of An imal Industry (BAI), the Bureau of Fisheries and 
Aquatic Resources (BFAR), and the Bureau of Plan t Industry (BPI) issue these permits, generally 
taking into account only sanitary and phytosanitary regulations.  However, in some cases domestic 
supply is also considered.  For example, fish pr oducts may be imported only when certified by the DA 
as necessary to attain food security.  Packaged food imports may be confiscated unless registered with 
the Bureau of Food and Drugs (BFAD).43 
59. All meat and meat products require a Forei gn Meat Inspection Certificate signed by an 
authorized veterinarian.44  Such imports are also subject to inspection and require a Veterinary 
Quarantine Clearance (VQC) issued by the Bureau of  Animal Industry (BAI) prior to shipment.  
Imports of meat must originate in a foreign m eat establishment recognized as an exporting entity by 
the Veterinary Administration and accredited in the Philippines.45   
60. Imports of fish products are hi ghly regulated;  if allowed each  shipment requires a permit or 
licence issued by the BFAR.  Fish imports are subject to a physical examination and microbiological 
analysis upon arrival.  If deemed safe, a Fishery Sa nitary and Phytosanitary Certificate is issued to 
release imports.46  Imports of live exotic species and live sh rimp and prawn are prohibited on the basis 
of an import risk analysis.   
61. Plants and plant products to be used as food,  feed or processing may be imported only after 
approval by the DA's Bureau of Plant Industry (BPI);   requirements varies by product.  Some products 
require only an SPS certificate while others are al so subject to inspection and verification upon 
arrival.   
62. All imported plants and plant produc ts of GM origin must be authorized by the BPI and must 
be accompanied by a certificate of GMO content issu ed by an authorized body from the country of 
                                                      
41 The BPS signs memoranda of understanding (MOUs) with foreign certification bodies to work 
jointly in assessing quality systems.  It has MOUs  with SIRIM QAS International (Malaysia) and DSN 
(Indonesia). 
42 Administrative Order No.18 series 2000. 
43 Dun and Bradstreet (2002). 
44 Dun and Bradstreet (2002). 
45 Department of Agriculture (2000). 
46 Fisheries Administrative Order 195 of 1999. The Philippines WT/TPR/S/149 
 Page 49 
 
 
origin or by an accredited laboratory.47  BPI issues an Approval Registry for plants and plant products 
that have undergone an approval process.  These plants require only an import permit and/or 
phytosanitary certificate for release from customs.  BPI randomly checks imported plant products to 
assess GM content, particularly for commodities known to be genetically modified overseas.48 
63. Since 1999, the Philippines has made some 79 notifications to the WTO Committee on 
Sanitary and Phytosanitary Measures.  These cover an array of measures including:  imposition of 
temporary import restrictions, on grounds of food safet y, animal health, and plant protection, and their 
termination;  regulations to import fish and aquatic products49, meat and meat products50, pet food51, 
and plants and plant products derive d from the use of modern biotechnology52;  prohibitions on the 
use of anti-microbial drugs53;  the HACCP audit of meat and milk exporting plants54;  and the 
implementation of a programme to eradicat e Foot and Mouth disease in the Philippines.55   
(c) Labelling and marking requirements 
64. Labelling and marking requirements do not seem to have changed substantially during the 
period under review.  The Philippines continues to  prescribe minimum labelling requirements for all 
imported and locally manufactured produc ts as specified in the Consumer Act.56  If an imported or 
domestically produced good is certified to have passe d the standard prescribed by the BPS, the label 
must contain the PS Quality Mark and/or Safety Mark.  Articles that cannot be marked prior to shipment, such as crude substances, and products im ported for private use and not for resale in their 
imported form, are exempt from marking requirements.
57 
(vii) Government procurement 
65. The Philippines is not a signatory to the WTO Agreement on Government Procurement 
(GPA);  it believes that binding rules on government pr ocurement is inappropriate in view of the need 
for flexibility given its importance as a development tool.58  The most important changes in the 
procurement system since 1999 was the introduction of an electronic procurement system and of new legislation.  The Government Procurement Refo rm Act (Republic Act No. 9184 of 10 January, 2003) 
regulates government procurement, including purch ases by government-owned corporations, of 
goods, services, infrastructure projects, and consulting services, regardless of the source of funds, 
whether local or foreign.  The Act is aimed at  standardizing and stre amlining the procurement 
process, and ensuring that the principles governi ng public procurement, transparency, and the 
provision of equal opportunities to all parties, are respected. 
                                                     
 
47 WTO document G/SPS/N/PHL/41, 22 April 2002. 
48 Department of Agriculture Memorandum Circulars No. 8 of 2003, and No. 12 of 2003. 
49 WTO documents G/SPS/N/PHL/15, 15 November 1999;  and G/SPS/N/PHL/49, 15 October 2003. 
50 WTO documents G/SPS/N/PHL/18, 9 June 20 00;  G/SPS/N/PHL/23, 5 December 2000;  
G/SPS/N/PHL/28, 23 March 2001;  an d G/SPS/N/PHL/28, 26 March 2002. 
51 WTO document G/SPS/N/PHL/38, 26 March 2002. 
52 WTO documents G/SPS/N/PHL/41, 22 April 2002;   and G/SPS/N/PHL/61-3, 18 February 2004. 
53 WTO document G/SPS/N/PHL/19, 27 June 2000. 
54 WTO document G/SPS/N/PHL/44, 20 September 2002. 
55 WTO document G/SPS/N/PHL/51, 29 January 2004. 
56 These include the registered trade or brand name, the registered trade mark, the registered business 
name, the address of the manufacturer , importer or repacker in the Philippines, the general make or active 
ingredients, the net quantity of contents, and the countr y of manufacture, if imported (Department of Trade and 
Industry, 2004). 
57 Dun and Bradstreet (2002). 
58 APEC (2005b), p. 26. WT/TPR/S/149 Trade Policy Review 
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66. The electronic procurement system, adopted in 2001, is aimed at enhancing transparency and 
reducing costs by having an electronic bid board, electronic catalogue, and electronic registry system.  It was to transform government procurement, rife with corruption, towards transparency, competition, 
and accountability, while lessening discretion, collusion, and delays.
59  According to the authorities, 
the E-system's introduction has made procurement cons iderably more transparent and less costly.  The 
agencies that have used it have shown substantia l savings, including on procurement time, and more 
bidders have been attracted.  Over the medium te rm, the authorities expect to generate savings of 
PhP8.1 million (equivalent to 9% of government  operating expenditures) as procurement becomes 
more transparent and efficient.60 
67. In general, procurement is through competitive bidding.  Alte rnative procurement methods 
are used under special circumstance s (Table III.5).  In all instances, however, the procuring entity has 
to ensure that the "most advantageous price" for the Government is obtained.61  The authorities 
indicate that the bid with the lowest cost to the G overnment is deemed to be the bid with the "most 
advantageous price". 
Table III.5 
Alternative methods of procurement 
Procurement method Terms and condition s for the use of alternative methods 
Limited source bidding (or selective bidding):  direct invitation to 
bid from a set of pre-select ed suppliers or consultants Procurement of highly specialized goods and consulting services 
that may be obtained only from a limited number of sources. 
Procurement of major plant components when, in order to 
maintain the plant's quality a nd performance, it is deemed 
advantageous to limit the bidding to known eligible bidders.  
Direct contracting (or single source procurement):  the supplier is 
only asked to submit a price quotation or a pro-forma invoice 
together with the conditions of sale, the offer may be accepted 
immediately or after some negotiations Procurement of goods that can only be obtained from the 
proprietary source, i.e. when pate nts, trade secrets and copyrights 
prohibit others from manufacturing the same item. 
When the procurement of critical components from a specific 
manufacturer, supplier or distributor is a necessary condition for a contractor to guarantee its performance. 
When goods are sold by an exclusive dealer or manufacturer, and 
for which no suitable substitute can be obtained at more advantageous terms. 
Repeat order:  direct procuremen t of goods from a bidder that had 
previously won a competitive bid, whenever there is a need to 
replenish goods. The unit price must be equal to or  lower than that provided in the 
original contract. 
The repeat order does not resu lt in splitting of requisitions or 
purchase orders. 
The repeat order cannot exceed 25%  of the quantity bought in the 
original contract. 
Shopping:  the procuring entity onl y requests price quotations for 
readily available off-the-shelf goods, or for equipment to be 
procured directly from s uppliers of known qualification When there is an un foreseen contingency requiring immediate 
purchase provided that the purch ase does not exceed PhP50,000. 
Procurement of ordinary or regul ar office supplies and equipment 
that does not exceed PhP250,000, does not result in splitting of contracts, and where at least 3 price quotations from bona fide 
suppliers are obtained. 
Table III.5 (cont'd) 
                                                      
59 The President's Budget Message for 2002. 
60 The President's Budget Message for 2004. 
61 A procuring entity is any government branch, department, office, agency, or body, including state 
universities and colleges, government-owned and/or contro lled corporations, government financial institutions, 
and local government units procuring goods, services, consulting services and infrastructure projects. The Philippines WT/TPR/S/149 
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Procurement method Terms and condition s for the use of alternative methods 
Negotiated procurement:  the procuring entity negotiates a 
contract directly with a tec hnically, legally and financially 
capable supplier, contractor or consultant.  In cases of 2 failed bids. 
In case of imminent danger to life or property during a state of 
calamity, or when time is of the essence arising from natural or man-made calamities or other cau ses where immediate action is 
necessary to prevent damage to or loss of life or property, or to 
restore vital public services, in frastructure facilities and other 
public utilities. 
Take-over of contracts, which have  been rescinded or terminated, 
and where immediate action is neces sary to prevent damage to or 
loss of life or property, or to  restore vital public services, 
infrastructure facilities and other public utilities. 
Where the subject contract is adjacent to an on-going 
infrastructure project provided, inter alia , that the original contract 
was awarded through a competitive bid, and that negotiations for 
the procurement are commenced befo re the expiry of the original 
contract. Purchases from another agency of the government such as the 
Procurement Service of the Depart ment of Budget Management  
Source:  Government Procurement Reform Act (Republic Act No. 9184). 
68. Each procuring entity must establish a single Bids and Awards Committee (BAC).  The BAC 
advertises and/or posts the invitation to bid, conducts pre-procurement and pre-bid conferences, 
determines the eligibility of prospective bidde rs, receives and evaluates bids, undertakes post-
qualification proceedings, and recommends the award of contracts to the head of the procuring entity.  
It may also recommend the use of alternative procurement methods. 
69. The bidding documents are prepared by the proc uring entity following the standard forms and 
manuals prescribed by the Government Procurem ent Policy Board (GPPB).  At all stages of the 
preparation of the bidding documents, the procuring entity must ensure equal access to information.  
70. Prior to issuing an invitation to bid, the BAC must hold a pre-procurement conference, except 
for contracts below certain amounts (PhP2 m illion for goods and PhP1 million for consulting 
services), for which it is optional.  The aim of the pre-procurement conference is to assess the availability of funds and whether the rele vant documents comply with the law. 
71. All invitations to bid for contracts under compe titive bidding must be advertised to ensure the 
widest possible dissemination.  At least one pre-bi d conference needs to be held within a reasonable 
period before the deadline for receipt of bids, to a llow prospective bidders to adequately prepare bids. 
72. The eligible prospective bidders must be ev aluated using numerical ratings based on the 
prescribed short-listing requirements.  A bid should, in  principle, have two components:  the technical 
and the financial component, and these must be submitted simultaneously in separate sealed 
envelopes.  The BAC must receive the bids on the date, time, and place specified in the invitation to bid and the bids must be opened in public on th e date, time, and place specified in the bidding 
documents. 
73. The BAC first examines the technical components of bids, and if satisfied then evaluates the 
financial components.  Short-listed bids for th e procurement of goods (including non-consulting 
services) and infrastructure are ranked from lowest to highest in terms of their calculated price;  the 
bid with the lowest calculated price is referred to as the "lowest calculated bid."   For procurement of 
consulting services, short-listed bids are evaluate d and ranked using numerical ratings in accordance 
with the evaluation criteria stat ed in the bidding documents.
62  The bids are ranked from highest to 
                                                      
62 These should include factors such as price, e xperience, performance, and quality of personnel. WT/TPR/S/149 Trade Policy Review 
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lowest in terms of their corresponding calculated rati ngs;  the bid with the highest calculated rating is 
the "highest rated bid".  Thereafter, the BA C verifies whether the bidder making the "lowest 
calculated bid" (for goods, infrastructure and non-cons ulting services) or the "highest rated bid" (for 
consulting services) has passed all the requireme nts and conditions as specified in the bidding 
documents.  If the bidder passes all the post-qualifica tion criteria, their bid is considered the "lowest 
calculated responsive bid" or the "highest rated responsive bid", and the contract is awarded.  
74. Specific deadlines apply, inter alia,  for the head of the procuring entity to approve or 
disapprove the BAC's recommendation, to issue the noti ce of award to the chosen bidder, and to sign 
the contract.  In general, the procurement process fr om the opening of bids to  award of the contract 
may not exceed three months.  The BAC's decisions ma y be contested at all stages of the procurement 
process, to the head of the procuring entity.  Any di sputes must be resolved before an award is made. 
75. The head of the agency may reject any bid or not award a contract if:  there is evidence of 
collusion between the employees of the procuring entit y, or between the BAC and any of the bidders, 
or between or among the bidders, or between a bidd er and a third party;  if the prescribed bidding 
procedure is not followed;  or if the contract is  not of benefit to the Government.  No data are 
available on the number of contracts th at have been rescinded on these grounds. 
76. Foreign participation in the procurement of goods remains restricted, and seems to depend 
upon the source of the funds for the project and th e domestic availability of the procured goods and 
services.  The Constitution provides for a strong pref erence to procure domestically.  It requires the 
state to give preference to qualified Filipinos ( section 10), and to promote the preferential use of 
Filipino labour, domestic materials, and locally produced goods, as well as to adopt measures that 
help make them competitive (section 12).  For fo reign assisted projects, overseas firms may apply, 
subject to a 15% price preference for domestic supplie rs (those with at least 75% Filipino ownership).  
However, for other projects, only Filipino firms may participate in public procurement, irrespective of 
the possible costs savings of using a foreign supplier.63  However, if the goods are not available 
locally, or where there is a need to prevent unfai r competition, foreign suppliers may be invited to 
participate.64  In addition, in the interest of efficiency and timely delivery of goods, the procuring 
entity may give preference to the purchase of domes tically produced goods that satisfy the specified 
or desired quality.  No data are available on fore ign participation in government procurement.   
(viii) Import operations of state-trading enterprises 
77. The Philippines has notified only the Nationa l Food Authority (NFA) as a state-trading 
enterprise to the WTO.65  The NFA trades rice, corn, and othe r commodities as authorized by the 
President.  It is responsible for ensuring food security and setting farm gate prices that guarantee 
reasonable farm returns while also ensuring reasonable consumer prices.66  The NFA keeps a 15-day 
buffer stock of grains (e.g. rice), which is increased  to a 30-day stock during the "lean season" (July, 
August and September).  It buys  domestic grain at support prices and subsidizes retail prices for 
poorer consumers.  In addition, the NFA bears the co st of storing, handling, milling, and transporting 
the rice.  It imports any shortfall in domestic pr oduction under import quota, and in principle still has 
the exclusive authority to import rice, even though it has been partially liberalized.  At present, private 
importers that are registered and licensed with th e NFA, may, according to the authorities, import a 
limited volume of rice of specific varieties (i.e. premium, fancy and glutinous varieties only).  The 
                                                      
63 APEC (2005b), p. 25. 
64 The foreign firm must originate in a country that gives the Philippines the same privileges. 
65 WTO document G/STR/N/4-7/PHL, 24 September 2002. 
66 One that enables farmers to recover production costs while earning modest profits, but that also 
ensures reasonable retail prices affordable to consumers. The Philippines WT/TPR/S/149 
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NFA imports under quota what is required to ensure  the country's food security, and the balance is 
allocated to private importers, including farmers. 
(ix) Local-content schemes 
78. The local content and foreign exchange balancing requirements under the Car Development 
Programme (CDP), Commercial Vehicle Develo pment Programme (CVDP), and the Motorcycle 
Development Programme (MDP), maintained si nce 1995, were eliminated as planned by 
30 June 2003.67  The Philippines was granted extended tran sitional periods to phase-out these TRIMs.68 
79. The authorities indicate that the requirement fo r soap and detergent manufacturers to use at 
least 60% of locally produced input  (cocochemical surfactant) was eliminated.69  Pharmaceutical 
firms are required to purchase semi-synthetic an tibiotics from a specific local  company, unless they 
can show that imports are at least 20% cheaper.70  This is implemented by the Bureau of Food and 
Drugs (BDAD). 
(x) Countertrade 
80. The Philippine International Trade Corporation (PITC) continues to administer countertrade 
transactions.  According to the authorities, count ertrade promotes Philippine  exports and facilitates 
investment, technology transfer, research and deve lopment, and related ac tivities without additional 
cost to the Government.  Since 1999, the PITC has administered 65-70 countertrade transactions 
(valued at US$448 million, as of Februa ry 2005), of which half are on-going. 
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(i) Procedures 
81. All exports must be covered by either an E xport Declaration (ED), filed by the exporter (or 
representative) with the BOC or through the one-st op export documents centres, or electronically 
through the Single Administrative Document (SAD).  Regulated exports require export clearance (section (iv)(a)).  Certificates of origin are re quired for exports under the GSP and AFTA.  Other 
permits and licences may be required for exports that are regulated or prohibited (see below). 
(ii) Export taxes and other charges 
82. Only plantation (non-native) logs are subject to an  export tax (20% of f.o.b.).  All other export 
taxes were abolished from July 1986 under Executiv e Order 26.  However, provisions still appear to 
exist that enable export taxes to be re-imposed on other products, although the authorities indicate that 
these may no longer apply.
71  Upon NEDA's recommendation, the President may impose a higher or 
                                                      
67 WTO document G/C/38, 24 October 2003. 
68 WTO documents G/L/325, 5 October 1999;  G/C/W/281, 17 July 2001;  G/C/W/289, 
30 August 2001;  and G/C/W/336, 5 November 2001. 
69 The use of hard surfactants is pr ohibited due to environmental concer ns but soft surfactants that are 
not necessarily coconut-based are allowed (RA 8970 of 2000). 
70 Executive Order No. 776 (Allowing the Importation of Semi-Synthetic Antibiotics only of Quantities 
and Types not Produced in the Philippines), 24 February 1982.  
71 Philippine Tariff Commission (2001d), Volume 1- Sections 514 and 515.  These products include 
wood products (lumber, veneer, and plywood);  mineral products (copper, iron, chromite, gold, clinker cement, 
Portland cement, mineral fuel (bunker fuel oil and petroleu m pitch), and silver);  plant and  vegetable products 
(abaca, bananas, coconut (copra, coconut oil, copra meal , copra cake, desiccated coconu t)), pineapple sliced or WT/TPR/S/149 Trade Policy Review 
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lower tax rate on any of the  products listed in the law, exempt any product from the tax or add any 
product to the list of taxable products.  In deciding th is, the President must take into account the need 
to meet domestic consumption, including of the pr ocessing industries, and the product's world price. 
83. The authorities indicate that the export tax on non-native logs is imposed to ensure an 
adequate, stable and sustainable supply of domestic timber.  However, export taxes are distorting and 
implicitly subsidize downstream processors by pr oviding logs at below world prices, thereby 
encouraging domestic value added, which may be an  inefficient use of resources if reliant on the 
subsidy.  The authorities indicate that revenue from the export tax is minimal.   
(iii) Minimum export prices  
84. Minimum export prices seem to apply for rice and corn;  according to the authorities, they are 
generally based on world prices.  Minimum export prices could have similar economic effects to export taxes.  
(iv) Export prohibitions, restrictions, and licensing 
(a) Export prohibitions and restrictions 
85. The list of regulated and prohibited exports does not seem to have changed during the period 
under review;  it includes endangered wildlife species and live animals (Table AIII.5).  Textiles and 
clothing are no longer regulated following the removal of export quotas from 2005.  The authorities indicate that exports of logs from native forests ar e also banned for environm ental reasons.  Exports 
are prohibited or regulated on grounds of national inte rest, security, and public health, and to fulfil the 
requirements of international ag reements and conventions (e.g. the ATC and CITES).  Regulated 
exports require prior export clearance from the relevant government agencies. 
86. Exports of rice and corn remain restricted.  In  order to ensure food security and price stability, 
these commodities may be exported only if there is a surplus, according to the authorities.  Fish 
exports are also regulated on grounds of domestic food security.  Exports, when allowed, require a 
permit issued by the Department of Agriculture.  Permits are granted on a per-shipment basis.  A 
sanitary certificate must also be issued on a per shipme nt basis.  In addition, only fish products that 
have been processed in fish processing establishm ents certified by the Bureau of Fisheries and 
Aquatic Resources (BFAR) as compliant with the Sa nitation Standard Operating Procedures (SSOP) 
and HACCP system, may be exported. 
(b) Export quotas  
87. The President may, where recommended by NEDA, impose an export quota on any good, 
taking into account factors such as the domestic demand, the world price, and the preferential 
treatment granted to Philippine exports by foreign governments.
72 
88. Exports of sugar (and until recently textiles and cl othing) are subject to bilateral restraints 
(Chapter IV).  The Philippines is allocated  a sugar export quota by the United States. 
                                                                                                                                                                     
crushed, pineapple juice or juice conc entrate, sugar (centrifugal sugar an d molasses), and tobacco (tobacco leaf 
and scrap tobacco);  and shrimps and prawns.  
72 Philippine Tariff Commission (2001d), Volume 1 - Section 515.  However, according to the 
authorities Section 515 does not apply. The Philippines WT/TPR/S/149 
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(v) Export operations of state enterprises 
89. Rice and corn exports in principle remain cont rolled by the NFA, but have been partially 
liberalized.  However, the authorities indicate that private firms may export only if there is surplus. 
(vi) Export support 
(a) Export subsidies and assistance 
90. According to the authorities, no export subs idies were provided during the period under 
review. 
(b) Duty and tax concessions 
91. The Export Development Act (EDA) provides for corporate tax credits for annual increases in 
export revenues.73  It also stipulates that enterprises earning at least 50% of their normal operating 
revenue from exports are entitled to incentives from the Board of Investments (BOI) and the 
Philippine Economic Zone Authority (PEZA) (see below).  Under the Omnibus Investment Code 
(OIC), which is administered by the BOI, tax in centives are available to producers of non-traditional 
exports and to activities that support exporters. 
92. Under the Government's Comprehensive Indus trial Policy and Directions for the Motor 
Vehicle Development Programme 2004-08, vehicles ma y be imported at preferential tariff rates, 
contingent on export performance.  Qualified partic ipants need to export a minimum of 10,000 units 
with an f.o.b. value of US$5,000 per unit.74 
Drawbacks 
93. Duties paid on imported materials used to ma nufacture or process exports may be fully 
refunded following exportation.  Exports must be wi thin one year of importing the materials, and the 
BOI must certify upon importation that locally produced competitive substitutes were unavailable.75 
Bonded Manufacturing Warehouse (CBMW)  Scheme and Bonded Smelting Warehouse 
94. The Customs Bonded Manufacturing Warehouse ( CBMW) Scheme allows for the tax-free 
and duty-free importation of raw materials used to manufacture goods exported within one year.76  
The importer must post a re-export bond equivalent  to the assessed taxes a nd duties.  A similar 
scheme exists for ores and crude metals, which, if us ed to manufacture exports, may be imported into 
a bonded smelting warehouse free of duty.77 
Export processing zones (EPZs) 
95. The Philippine Economic Zone Authority (PEZA ) has jurisdiction over the four government-
owned and administered EPZs, and all PEZA-regist ered privately owned and operated economic 
zones (called ecozones).  Enterprises that wish to  operate in these need to  fulfil PEZA's eligibility 
                                                      
73 The tax credit is 2.5% for a 5% increase in annual export revenue, 5% for a 10% increase, 7.5% for a 
15% increase, and 10% fo r increases above 15%. 
74 The minimum export volume and f.o.b. value may be modified by the DTI or by the BOI (Executive 
Order 244, 3 October 2003). 
75 Philippine Tariff Commission (2001d), Volume 1 - Section 106. 
76 Philippine Tariff Commission (2003b), Volume II - Section 2002. 
77 Philippine Tariff Commission (2003b), Volume II - Section 2005. WT/TPR/S/149 Trade Policy Review 
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criteria;  100% foreign ownership is allowed.  In centives include:  exemption from corporate income 
tax for four to eight years78;  duty exemptions on imports of cap ital equipment and raw materials;  
exemptions from excise taxes on exports;  refunds of value-added taxes paid on imports for re-export.  
Imports and export procedures are also simplified.  Producers located in ecozones are allowed to sell a 
maximum of 50% and 30% of annual sales to Filipino-owned and foreign-owned enterprises, 
respectively, subject to payment of appropriate taxes and duties. 
(vii) Export performance requirements 
96. Tax incentives provided under the Omnibus Inv estment Code (OIC) to non-traditional 
exporters are contingent on e xport performance.  The export perfo rmance requirement is higher for 
foreign-owned enterprises (70% of production) than for Philippine owned companies (50%) 
(section 4 (ii)).  Under the Export Development Act (EDA), enterprises generating at least 70% of 
normal operating revenue from e xports are entitled to incentives. 
(viii) Export finance, insurance, and guarantees 
97. The Trade and Investment Development Corporation of the Philippines (TIDCORP, also 
called the Philippine Export-Import Credit Agency, or PhilEXIM), which is under the Department of 
Finance, is the government export credit agency.  It aims to stimulate exports of goods and services by 
facilitating access to credit, especially for small a nd medium-sized enterprises (SMEs), and to boost 
employment.  TIDCORP provides exporters with loans, guarantees, insurance, and technical 
cooperation, and preshipment export finance guarantees (PEFG) to SMEs.79  This has improved their 
access to credit by providing an alternative to th e traditional collateral required by banks.  The 
Corporation also provides a post shipment risk guara ntee (PERG) in case exporters are not paid.  
TIDCORP offers the Term Loan Guarantee Pr ogramme (TLGP), which covers medium- and 
short-term loans extended to SMEs for the acqui sition of fixed assets and/or for use as working 
capital.  Guarantee and credit f acilities are also available to large exporters (assets above 
PhP100 million).80  In 2003, assisted firms generated exports of US$1,224 million and created 
28,904 jobs.  TIDCORP also  offers export credit insurance (ECI) to Philippine-based exporters.  It is 
designed to allow exporters to provide credit to  buyers by insuring them against non-payment by 
foreign customers due to commercial and political risks. 
(ix) Export promotion and marketing assistance 
98. The Center for International Trade Expositi ons and Mission (CITEM) under the DTI is an 
export promotion agency.  Export promotion is mainly undertaken through  the participation of 
Philippine exporters in  trade fairs, special exhibits, in-sto re promotions, and other promotional 
activities.  Since 1999, efforts to disseminate inform ation have intensified:  Tradeline Philippines (an 
online database of trade statistics and other expo rt-related information) has been upgraded, the 
exporters' electronic library has been improved, and the Export Assistance Network (Exponet), a 24-
hour one-stop export information centre, has reopened. 
                                                      
78 PEZA-registered firms may subsequently pay 5% tax on gross income instead of all national and 
local taxes. 
79 This guarantee covers 90% of loans taken by SMEs to finance preshipment working capital. 
80 For example, TIDCORP's General Facility Progra mme (GFP) guarantees up to 100% of their loans 
to finance exports, manufacturing, and services rendered to promote exports and import substitution industries. The Philippines WT/TPR/S/149 
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(4) MEASURES AFFECTING PRODUCTION AND TRADE  
(i) Industrial policy and incentives 
99. The Philippines has a long history of providing in centives (mainly tax) to selected activities.  
The main strategy has been to channel investment s into sectors considered desirable for meeting key 
objectives, such as generating exports  and employment.  Thus, the incentive system attempts to direct 
investments into eligible priority areas, a form of selective government intervention.81 
(a) Tax incentives 
100. Tax incentives erode the tax base, add to the tax system's complexity, and undermine its 
equity and neutrality in allocating resources.  They also contributed to the Government's reliance on 
tariffs, which accounted for 8% of total tax revenu es in 2003, although down from 10% in 1999.  This 
decline reflected mainly reduced tariff rates, in creased duty-free imports under various incentives, and 
deteriorating customs administration.82 
101. Incentives encourage investment in specific activities, regions and non-traditional exports.  
They are still regulated by the Omnibus Investment C ode (OIC), and while ava ilable to nationals and 
foreigners there is some discrimination against th e latter (see below).  Some are subject to export 
performance requirements.  In general, under the OI C, only enterprises registered with the BOI and 
producing non-traditional exports or e ngaged in a sector listed in the Investment Priorities Plan (IPP) 
are entitled to tax exemptions and concessions, and to some non-tax incentives.  However, even if the 
activity is not listed in the IPP, an enterprise may be  eligible to receive incentives if it exports at least 
70% of production, or 50% for a Filipino-owned enterprise (at least 60% domestic equity).83  In 2004, 
the IPP list included manufacturing of non-traditional exports84, and activities that supported 
exporters, and some 15 specific sectors.85 
102. The tax incentives available under OIC to BOI-registered firms include, inter alia :  4-6 year 
corporate tax holidays depending upon the enterprise type and project location86;  tax credit for taxes 
and duties paid on raw materials, supplies and semi -manufactured products used in the manufacture of 
exports;  and tax credits for breeding stocks and ge netic materials.  BOI-registered firms located in 
less developed areas may be eligible to claim up to  a full tax deduction for infrastructure expenditure 
and labour costs of hired workers. 
                                                      
81 Medalla (2002). 
82 Manasan (2002). 
83 BOI (2001). 
84 Non-traditional export pr oducts exclude copra, copra meat and cake, crude coconut oil, desiccated 
coconut, inedible molasses, pineappl e in syrup, logs, lumber, plywood and veneer, and unprocessed tobacco. 
85 These covered agriculture and fisheries;  air, land and inter-island transport;  drugs and medicines;  
ecological solid waste management;  energy;  industrial tree plantation;  iron and steel;  information and 
communications technology;  infrastructure (e.g. rura l electrification system, telecommunications and power 
projects),  mass housing projects;  petrochemicals;  printing;  refining, storing, marketing and distributing of petroleum products;  tourism;  and R & D activities (BOI, undated b). 
86 Enterprises are classified as "pioneer", "non-pioneer" or "expanding".  A pioneer enterprise 
introduces new technology to the Philippines, engages in agriculture, forestry or mining to pursue national goals, or produces non-conventional fuels or equipment utilizing such energy sources.   WT/TPR/S/149 Trade Policy Review 
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103. Other tax incentives are also available to regional headquarters and regional operating 
headquarters located in the Philippines and unde r some 44 special investment incentives laws 
(Table III.6). 87 
Table III.6 
Tax incentives provided under selected special investment incentives laws 
Lawa Sector Incentive 
Presidential Decree No. 87 and 
No. 1857 Oil and gas service contractors and 
developers of geothermal projects Exemption from import duties on imports of machinery, 
equipment, spare parts, and all materials in petroleum-
related projects Exemption from all taxes except corporate tax 
Republic Act No. 7942 Mining operators a nd developers Tax incentives under the Omnibus Investment Incentives 
Code 
A longer net operating loss carry-over for a period of 
five years 
Accelerated depreciation 
Republic Act No. 7471 Overseas shipping operators A te n-year income tax holiday and duty exemption on 
imports of ocean going vessels 
Republic Act No. 6957, as 
amended by No. 7718 Build-Operate-Transfer projects 
(investment of over PhP1 billion) Same incentives granted to  BOI enterprises under the 
Omnibus Investment Code 
Republic Act No. 8502 Jewellery industry Duty-free importation on raw materials and equipment used 
to manufacture jewellery 
Exemption from excise tax on the sale of jewellery 
Republic Act No. 7916 as 
amended by R. A. No. 8748 Tourism development projects Grant special ec onomic zone status to tourism development 
zones and to tourism states.  The tax incentives provided are 
similar to those provided to en terprises located in the export 
processing zones. 
Tax Code  Universal incentive to  any firm Net operating loss carry-over for the three consecutive 
taxable years immediately following the year of the loss 
Accelerated depreciation deduction for the wear and tear of assets 
a This list is not comprehensive;  there are so me 44 laws providing special investment incentives. 
Source : Information provided by the authorities. 
104. According to the authorities, tax incentives ar e generally used to compensate for market 
imperfections and for weaknesses in domestic infrastru cture, to promote investment in less-developed 
areas, and in industries that may have positive spillove r effects (i.e. transfer technology to the rest of 
the economy).  Nevertheless, the authorities recogni ze that the tax incentives system has become too 
unwieldy, being overloaded with too many polic y objectives.  Moreover, incentives, especially 
allowing duty-free imports of capital goods for export,  have drained government revenues (estimated 
at PhP299 billion in 2003), and according to the aut horities, the supposed "benef its" of tax incentives, 
such as increased incomes and employment, have fa llen well short of expectations.  There is no 
systemic monitoring or evaluation of incentives gran ted under the different laws, and as a result, the 
tax incentives system lacks transparency.  Publica tion of tax expenditures (t hat is, revenue forgone 
from incentives) together with the evaluation of individual measures would greatly enhance 
transparency of the tax system and contribute to more effective tax policy.  Tax incentives are not 
costless, and experience in other countries suggest s that they are seldom cost-effective, even if 
justified on market failure grounds.  They also risk  distorting resource allocation by subsidizing good 
investments that would have been undertaken  in any case without assistance, or turning bad 
investments into profitable ones.  Eliminating tax in centives that are no longer appropriate or effective 
would permit a broadening of the tax base, which c ould be accompanied by redu ctions in statutory tax 
rates without necessarily involving any loss in tota l tax revenues;  the outcome would be a more 
neutral, market-oriented tax system. 
                                                      
87 BOI (2001). The Philippines WT/TPR/S/149 
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105. The Government is attempting to reform the tax incentives system by rationalizing and 
harmonizing all investment incentives under one law.  This would list the priority areas and the incentives to be granted to investors registered with the various investment promotion agencies.
88  
According to the authorities, the proposed incentive system would be:  (a) highly focused to ensure 
that only those economic activities in which the count ry has a comparative advantage are promoted;  
(b) efficient enough to promote optimal allocation of  resources and promote neutrality in terms of use 
of the country's limited resources;  (c) time-bound to ensure viability of the investing firm;  and (d) simple enough to administer and monitor to address revenue leakages.   
(b) Non-tax incentives 
106. BOI-registered enterprises investing in sectors lis ted in the IPP also enjoy non-tax incentives.  
They may employ foreign nationals in supervisory, technical or advisory positions for five years from 
date of registration.
89  In addition, they may import equipment for a period of ten years from their date 
of registration, subject to posting of a re-export bond, and may operate bonded manufacturing/trading warehouses.
90  They also benefit from simplified customs procedures to import equipment, spare 
parts, raw materials, and to export.91     
Small and medium-sized enterprises (SMEs) 
107. The SME sector is considered the backbone of  the economy.  In 2002, it comprised about 
99.7% of all registered firms and employed 70.4% of the labour force.92  In principle, SMEs are 
reserved to Philippine nationals.  However, foreign participation is  allowed if the enterprise uses 
advanced technology (as determined by the Departme nt of Science and Technology (DOST)), directly 
employs at least 50 employees, and has a minimum paid-up capital of US$100,000.  The Barangay 
Micro Business Enterprise (BMBE) Act, enact ed in 2002, provides incentives to promote the 
establishment of micro business enterprises.  These include income tax exemptions, exemption from 
the coverage of the Minimum Wage Law, access to a special credit window, and training and 
marketing assistance programmes.  Local governments are also encouraged to reduce or exempt such 
enterprises from local taxes, fees, and charges. 
108. The Small Business Guarantee and Finance Co rporation (SB Corporation), an agency 
attached to the Department of Trade and Industr y, provides credit guarantees and financing facilities 
to support SME development.  The SB Corporati on provides funds either directly or through the 
banking system.93  The DTI also provides training packages to SMEs. 
(ii) Competition policy  
109. While the Philippines has no explicit competition policy, the authorities indicate that major 
market-opening reforms since the 1980s were directed  at promoting competition.  However, although 
market openness is a highly effective means of e nhancing competition, trade and competition policy 
can be mutually reinforcing, especially in services.   
                                                      
88 Congress is now deliberating on the bill to rationalize the fiscal incentives structure. 
89 The positions of president, general manager, an d treasurer are not subject to this limitation. 
90 BOI (2001). 
91 A one-stop import and export documentation system has been established to facilitate imports of 
equipment, spare parts, and raw ma terials, as well as exports.   
92 Micro enterprises have assets of up to PhP3 million and employ from 1 to 9 employees;  small 
enterprises from PhP3 to PhP15 million and from 10 to 99 employees;  and medium enterprises from 
PhP15 million to PhP100 million and from 100 to199 employees. 
93 Department of Trade and Industry (2003). WT/TPR/S/149 Trade Policy Review 
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110. The Philippines does not have a general competiti on law, but instead has several laws dealing 
with competition (Table III.7).  Despite their nu mber and diversity, they have inadequate to 
established competition in the economy.  First, since each law addresses specific situations, there is a 
risk of one law negating the positive effects of anothe r.  Second, the actions prohibited are too loosely 
defined for the laws to be effective.  For inst ance, while the Constitution bans any activity that 
restrains domestic trade that may result in anti -competitive behaviour and provides the Government 
with the authority to regulate or prohibit monopolies, these activities are not defined.94  T h i r d ,  
negligible penalties are not a sufficient deterrent.  Four th, there is a lack of jurisprudence and judicial 
experience in hearing competition cases.  Fifth, as  there is no central enforcement agency, both 
implementation and enforcement are fragmented.95 
Table III.7 
Laws dealing with competition in the Philippines 
Law Description 
Philippine Constitution Prohibits anti-comp etitive practices; however, monopolies are not 
prohibited per se , but only when public interest so requires.  
Prohibits acts that restrain trade or unfair competition. 
Revised Penal Code Defines and penalizes monopolies and acts that restrain trade and 
provides penalties therefore. 
Civil Code of the Philippines (1950) and Republic Act No. 165 (known as the Act to Prohibit Monopolies and Combinations in 
Restraint of Trade) Allows for the collection of damages arising from unfair 
competition. 
Corporation Code of the Philippines  Provides the ru les regarding mergers and consolidations, and the 
acquisition of all or substantially all the assets or shares of stock of 
corporations. 
Revised Securities Act  Complements the Co rporation Code prohib iting the manipulation 
of security prices, and insider trading. 
Price Act  Declares that cartels, hoard ing and profiteering are illegal.  It only 
applies to specific goods covered by the legislation. 
Consumer Act of the Philippines Imposes penaltie s for such behaviour as deceptive, unfair and 
unconscionable sales practices, in both goods and credit 
transactions. 
Department of Trade and Industry, Department Administrative Order No.8 Prohibits chain distribution plans and pyramid sales schemes in 
the sale of consumer products. 
Source : Philippine Tariff Commission (2001), Competition Law and Policy .  Available at:  
http://www.tariffcommissi on.gov.ph/competit.html [23 March 2004];  and Competition policy:  Republic of the 
Philippines .  Available at:  http://www.gl obalcompetitionforum.org/regions /asia/Phillipines/phil_cp.pdf 
[4 April 2004]. 
111. The Government acknowledges the need to en act a general competition law to address 
existing inadequacies.  However, some existing legi slation would conflict with the introduction of a 
general competition law.  An example appears to be the Price Act, which provides for price controls.  
These statutes would need to be identified and ex amined.  Another critical issue is the lack of 
experience and knowledge in competition policy matters, particularly in the judiciary;  this not only 
undermines the current system but would also make enforcing any new law difficult. 96 
112. The institutional arrangements supporting compe tition policy are weak and ineffective.  The 
Philippines does not have a central enforcement agency , but rather, several agencies are in charge of 
implementation and enforcement, including the Ta riff Commission, the Bureau of Import Services, 
the Bureau of Trade Regulation and Consumer Protection, and the Securities and Exchange 
                                                      
94 The Constitution prohibits "combinations in restrain t of trade or unfair competition" and authorizes 
monopolies to be regulated or prohibited when in the public interest. 
95 Philippine Tariff Commission (2001a). 
96 UNCTAD (undated). The Philippines WT/TPR/S/149 
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Commission.97  Industry-specific agencies are in charge of enforcement at the sectoral and product 
level.98  Duplication and diffused responsibility seems to exist among these agencies;  they rarely 
operate in a coordinated manner, and sometime s produce conflicting policies.  Forming a single 
enforcement authority could thus be a key step  in implementing an effective competition policy.99  
The authorities recognize that effective implementation and enforcement of laws should be vested in a 
centralized agency with sufficient powers to oversee  and monitor different sectors, and indicate the 
intention to establish a Fair Trade Commission.  They  are also aware, however, that efforts to increase 
competition will face resistance from the rent-seeking groups that control most corporations in the 
economy and maintain powerful political and me dia connections, thereby compounding the 
difficulties of reform. 
(iii) Price controls 
113. The Price Act allows for price ceilings to be  imposed on certain goods and commodities in 
times of national emergency declared by President.  The Department of Industry and Trade monitors 
prices of commodities subject to the legislation.100  The National Price Coordinating Council, chaired 
by DTI, implements the price controls, in conjunc tion with the other government departments (e.g. the 
Departments of Agriculture, Health, and Enviro nment and Natural Resources) coordinates price 
stabilization programmes and advises the President on related policy matters.  These agencies issue suggested retail prices when justified a nd recommend, and enforce price ceilings.
101  The prices of 
certain goods, such as cement, are regulated on grounds of public inte rest.  Price fixing authorities set 
the charges of water, electricity, te lephone, and public transportation. 
114. The National Food Authority (NFA) controls rice prices.  It reviews and adjusts the support 
price at which it buys rice from farmers periodically to ensure a fair return.  The NFA uses the Government's ability to finance this programme as a guideline to setting the support price.  In addition 
to the basic support price, the NFA grants a premium of 5% of the support price or PhP0.50 per kg. to 
farmers selling rice to the NFA from March to Augu st.  The NFA also sets a release price depending 
on the available funds and the prevailing market pric e.  The NFA sets two release prices the wholesale 
price at which NFA sells rice to licensed and accredited retailers
102;  and a retail price, which is the 
                                                      
97 UNCTAD (undated). 
98 These agencies include the Cent ral Bank;  the Insurance Commission;  the National Food Authority 
(rice, corn, wheat and other grains and food stuff);  the Sugar Regulatory Administration;  the Philippine 
Coconut Authority;  the Garments and Textile Export Bo ard;  the Board of Investments (pioneer/non-pioneer 
industries and those listed in the Investments Priorities Plan);  the National Telecommunications Commission;  the Land Transportation Franchising and Regulatory Boar d;  the Civil Aeronautics Board;  the Maritime 
Industry Authority;  the Philippine Ports Authority;  and the Department of Energy, the Energy Regulatory 
Board, and the National Power Corporation (Philippine Tariff Commission, 2001a). 
99 UNCTAD (undated). 
100 These include "basic necessities" (i.e. canned fish and other marine products, processed milk, 
coffee, laundry soap, detergen t, candles, bread, and salt), and "prime  commodities" (i.e. fish sauce, flour, 
processed and canned pork, processed and canned beef an d poultry meat, noodles, vinegar, soy sauce, soap, 
paper, school supplies, cement, clinker, G.I. sheets, hollow blocks, construction nails, batteries, electrical 
supplies, light bulbs, and steel wires). 
101 The Department of Agriculture monitors prices of beef and poultry meat, rice, corn, cooking oil, 
fresh, dried fish and other marine products, fresh eg gs, fresh and dried pork, fresh milk, fresh fruit and 
vegetables, root crops, sugar, fresh dairy products, fe rtilizer (chemical and organic), pesticides, herbicides, 
poultry, swine and cattle feeds, and veterinary products for poultry, swine and cattle.  The Department of Health 
monitors pharmaceutical prices.  The Department of Environment and Natu ral Resources monitors prices of 
firewood, charcoal, plywood, plyboard, nipa shingles, and sawali. 
102 In general, the NFA can only license Filipino citizens to retail rice and only licensed retailers can be 
accredited.  However, under the Retail Trade Liberalization Law (R.A. 8762) foreigners that invest at least 
US$2.5 million in the Philippines are qualified to retail, and could obtain a licence. WT/TPR/S/149 Trade Policy Review 
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mandatory price at which NFA rice is sold to cons umers and non-retailers.  The retail price must be at 
least 1.8 times its support price.   
115. In order to "stabilize" the price of certain co mmodities, such as sugar and fertilizer, the NFA 
is also allowed to intervene in th ese markets.  An Executive Order issued by the President is required 
before intervention.  In March 2004, the President  authorized the NFA to intervene in the sugar 
market to stabilize falling prices, under Executive Order 293.103  The NFA purchased the volume of 
raw sugar that the Department of Agriculture in  consultation with the Sugar Regulatory Authority 
(SRA) deemed necessary to increase the price (Chapt er IV).  The NFA, in consultation with the 
Department of Agriculture, must also determine the marketing/distribution strategies and monitoring 
systems for the affected commodities. 
(iv) Corporate governance 
116. As in many East Asian countries, the need  to strengthen corporate governance became 
evident during the financial crisis in the region.104  In the Philippines, this and other events that 
adversely affected the perception of the interna tional investment community, prompted a growing 
interest in strengthening the corporate governance system from both the public and private sectors.105  
As a result, the Presidential Commission on Governan ce and an Institute for Corporate Directors were 
formed, and legal and regulatory reforms and cap acity building programmes were implemented.  
Appropriate corporate governance in the Phili ppines is seen as having potential to promote 
competitiveness and broaden access to capital. 
117. The Securities Regulation Code (SRC) and Cor poration Code and, am ong other laws, govern 
corporate activities in the Philippines.106  The Philippine Securities and Exchange Commission (SEC) 
administers the SRC, the Corporation Code, as well as other laws107, and has supervisory 
responsibilities for all corporations, including unlisted co mpanies.  It is the primary regulator of the 
capital market, with powers to supervise and regulat e the exchanges;  regulate securities transactions;  
license securities stockbrokers and dealers;  and promulgate rules and regulations on securities 
trading.  The SRC is the principal law on securitie s, and governs the rules and regulations of the 
Philippine Stock Exchange (PSE).  In 2002, th e Securities and Exchange Commission issued a 
Manual on Corporate Governance.108  The Corporation Code regulates private corporations;  it sets 
out provisions governing incorporation, the powers and liabilities of directors, officers, and 
stockholders, rules on corporate mergers and reor ganizations, and penalties for violation.   
                                                      
103 The NFA was called to intervene when the price of sugar dropped to PhP640 per bag; this was 
below the minimum average price of  PhP700 estimated by the SRA for farmers to be profitable. 
104 OECD (2001). 
105 The other events included:  some high-profile cas es involving allegations of corrupt practices and 
weaknesses in corporate governance and the regulato ry environment (the cases involved BW Resources 
Corporation in late 1999, and the bankruptcy of the Urba n Bank in early 2000);  the continuing shortfalls in 
government revenues, which suggested weaknesses in tax administration;  the growing concern about the lack of 
transparency and accountability prompt ed by corruption allegations against President Estrada in late 2000;  and 
the inclusion of the Philippines on a list of 15 countrie s considered non-cooperative to anti-money-laundering 
measures by the OECD's Financial Action Task Force (World Bank, 2001). 
106 Other corporate related laws include the Financing Company Act (RA 5980 as amended by RA 
8556), Investment Houses Law (PD 129 as amended by RA 8366), Investment Company Act (RA 2629), 
Securitization Act (RA 9267), and the Civil Code (specifically those provisions pertaining to partnerships).   
107 These include the Anti-Money Laundering Law (RA 9160), Special Purpose Vehicle Act (RA 
9182), Retail Trade Liberalization Act of 2000 (RA 8762), Omnibus Investments Code (EO 226, Book III), 
Foreign Investment Act of 1991 (RA 7042 as amended by RA 8179), Education Act of 1982 (BP 232 as 
amended by RA 7798), and the Anti-Dummy Law (CA 108). 
108 SEC (2002). The Philippines WT/TPR/S/149 
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118. The Corporation Code guarantees shareholders  the right to elect, remove, and replace 
directors;  vote on certain corporate acts;  subscrib e to the capital stock of the corporation;  obtain 
information about the company;  receive returns on investment;  and dissent on certain decisions of 
the board.  The Code mandates the use of cumulative voting in the election of directors.  Although 
directors may be removed with or without cause, th e Code prohibits removal without cause if it will 
deny minority shareholders board representation.  Removal of directors requires an affirmative vote 
by owners of two thirds of the outstanding capital. 
119. The Corporation Code also stipulates that corporations must hold annual meetings of 
shareholders.  SEC regulations  require all corporations to file a General Information Sheet (GIS) with 
the SEC within thirty days of their annual stockhol ders' meeting.  Corporations must file audited 
financial statements with the SEC annually;  failure  to do so may result in sanctions, such as fines, 
suspension or corporate de-registration.  In 200 3, the SEC began revoking registration for about 
200,000 corporations that had faile d to submit the required statements for five consecutive years 
(from 1997 to 2002).  For listed companies and other capital market participants (e.g. underwriters, 
brokers and dealers, unlisted issuers of securiti es, and public companies) the SRC requires the 
submission of current, quarterly, or annual reports in  order to provide timely and relevant information 
to the public.  SRC sanctions for non-compliance in clude the imposition of fines, suspension, or the 
revocation of registration, and de-listing.  At e nd October 2004, the SEC had collected PhP10 million 
in fines for such violations, and either suspended or revoked the registration of 24 securities issuers. 
120. Shareholders may bring individual, class or de rivative suits for wrongful or fraudulent acts of 
directors.  However, there seem to be substan tial costs and delays in the prosecution of cases.  
Disputes among shareholders or be tween shareholders and the corpor ation are the responsibility of the 
Regional Trial Courts. 
121. The Philippines seems to have laid the buildi ng blocks to improve corporate governance.  
However, as in public governance, the enforcemen t structure is weak, and monitoring mechanisms 
among businesses are inadequate.  In this context, the Institute of  Corporate Directors has been 
instrumental in moving the agenda forward by cr eating a comprehensive national plan for improving 
corporate governance.  It has drafted guidelines on the role and responsibilities of corporate boards, a 
code of proper practice for directors, and a corporate code of governance for enterprises.109  I n  
addition, the SEC issued a number of circulars in 2003 intended to institute more reforms and ensure 
compliance with the Code of Corporate Governance .  One of the SEC's main activities has been to 
undertake a thorough monitoring of company complia nce with corporate governance commitments as 
stated in the Manual of Corporate Governance, and to seek explanations for non-compliance. 
(v) State-owned enterprises and privatization 
122. State-owned enterprises have generally performed  poorly and have been a substantial fiscal 
burden.  In 2000, the Government made a commitment to improve the financial soundness of the 
government corporate sector through greater financia l discipline and better resource management to 
lessen the dependency on government subsidies.   These reforms included the stringent review of 
Government Owned and Controlled Corporations (GOCCs) requests for support, for net lending and 
tax relief, and tighter approval of government guarantees for GOCC loans.110  Despite these efforts, 
the government corporate sector's financial position h as deteriorated.  In 2004 (September), national 
government subsidies to GOCCs reached some PhP7 billion.  The total deficit of GOCCs increased 
                                                      
109 World Bank (2001). 
110 Loan guarantees are normally extended on ly to entities that perform a critical role. WT/TPR/S/149 Trade Policy Review 
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from PhP4.59 billion in 1999 to PhP19.16 billion in 2000.111  In 2001, the deficits of the 14 GOCCs 
monitored by the IMF increased to PhP24.54 billio n;  the National Power Corporation (NPC) and 
Mayniland Water Corporations mainly accounted for th is higher deficit.  In addition, unfavourable 
market conditions in 2001 dampened the Government 's privatization efforts and delayed the sale of 
some "big ticket" items scheduled for disposal.  Th e authorities indicate that there are currently eight 
big ticket enterprises still to be privatized.   
(vi) Intellectual property rights 
(a) Overview  
123. The Philippines is party to the Convention Establishing the World Intellectual Property 
Organization (WIPO) and to other interna tional conventions on intellectual property.112  Since its last 
Review, the Philippines has become a party to the Patent Cooperation Treaty (2001);  the WIPO Copyright Treaty (2002);  and the WIPO Performances and Phonograms Treaty (2002).  The Philippines has an extensive body of legislation on in tellectual property.  The main legislation remains 
the Intellectual Property (IP) Code (Republic Act 8 293 of 1998) which, according to the authorities, 
complies with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights 
(TRIPS).
113  The IP Code includes the patent, trade ma rk, and copyright laws;  utility models and 
industrial designs are protected under the patent la w.  Since 1999, several Office Orders have been 
issued to facilitate implementation of the IP C ode.  It was amended by Republic Act No. 9150 in 
2000, to provide for the protection of layout-designs (topographies) of integrated circuits.114  N e w  
legislation also protects new plant varieties (2002) and regulates the import, export, and production of 
optical disks, including tools and materials used in their replication (2004).115 
124. The Intellectual Property Office's (IPO) ma in mandate remains administration and 
implementation of the IP Code.  Its other functions  do not seem to have changed in the period under 
review. 
(b) Patents 
125. Inventions are granted patent  protection under the IP Code and its implementing rules and 
regulations.116  According to the IP Code, a patentable invention is "any technical solution of a 
problem in any field of human activity which is ne w, involves an inventive step and is industrially 
applicable".  An invention can be related to a product, or process.  The law lists non-patentable 
inventions.117  Their protection may be sought by means of a utility model application or an industrial 
                                                      
111 The worst performing companies were the Phili ppine National Oil Company (PNOC), the National 
Development Company (NDC), and the National Food Authority;  their combined deficit totalled P11.4 billion. 
112 The Berne Convention for the Protection of Literary and Artistic Works (1951 administrative 
provisions and since 1997 substantive provisions), Paris Convention for the Protection of Industrial Property 
(1965), Budapest Treaty on the International Recognition of the Deposit of Microorganisms for Purposes of 
Patent Procedure (1981), and the Rome Convention for the Protection of Performers, Producers of Phonograms 
and Broadcasting Organizations (1984). 
113 IPO (undated a). 
114 Act Providing for the Protection of Layout Design (Topographies) of Integrated Circuits (Republic 
Act No. 9150). 
115 Act to Provide Protection to New Plant Varieties (Republic Act No. 9168), and the Optical Medial 
Act (Republic Act No. 9239). 
116 WTO document IP/N/1/PHL/P/1, 1 August 2001. 
117 Non-patentable inventions include discoveries, scientific theories, and mathematical methods;  rules 
and methods of performing mental acts, playing games or doing business, and computer programs;  diagnostic The Philippines WT/TPR/S/149 
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design application (aesthetic aspects of an article of manufacture) or by means of a copyright 
(computer software). 
126. The inventor or the person that commissions the work has the right to own the patent.  Patents 
are granted using the first to file rule , and the right of priority is applied.118  Hence, if a person has 
previously applied for the same invention in an other country, which affords similar privileges to 
Filipino citizens, the date of filing the foreign app lication is considered as the day of filing in the 
Philippines. 
127. Upon receipt of the application, the examiner  checks whether the application satisfies the 
formal requirements needed for the grant of a filing da te.  If so, the patent application is published in 
the IPO Gazette  together with a search document citing any documents that reflect prior art.119  After 
publication of a patent application, any interested  party may inspect the application documents filed 
with the Office and make observations concerning th e patentability of the invention.  A substantive 
examination is only conducted upon request.  If a patent  is not granted, the applicant may appeal the 
decision to the Director of Patents.  The Director's  decision may be appealed to the Director General, 
and his decision may be appealed to the Court of Appeals.  Final appeal is to the Supreme Court.120 
128. A patent takes effect on the date of the pub lication of the grant of the patent in the 
IPO Gazette .  The term of a patent is 20 years from the filing date.  Patent owners have the right to 
assign, or transfer by succession the patent, to co nclude licensing contracts for the patent, and to 
exclusively use the patented good or process.  Ho wever, the law places limitations on the patent 
rights121, and confers prior user right.122  Under specific circumstances,  a government agency or third 
person authorized by the Government may exploit th e invention even without agreement of the patent 
owner.  In addition, any interested party may, upon payment of the required fee, ask for the cancellation of a patent on grounds that the inven tion is not patentable, that the patent does not 
disclose the invention in a manner sufficiently clear that it could be carried out by anyone else, and 
that the patent is contrary to public order or morality. 
129. Compulsory licensing may be granted without  the patent owner's agreement on specific 
grounds including:  national emergency;  public inte rest, in particular, national security, nutrition, or 
health;  or where a judicial or administrative body has determined that the patent owner is exploiting 
the patent in an anti-competitive manner.
123  However, under normal circumstances, the authorities 
encourage parties to enter a voluntary licensing agre ement, and to file a petition for a compulsory 
licence with IPO only as a last resource, when the pa tent owner has not authorized others to exploit 
                                                                                                                                                                     
and treatment methods for animals or humans;  plant varieties, animal breeds or biological process for their 
production. 
118 The right to the patent belongs to the person who filed the application at the earliest filing date or 
the earliest priority date. 
119 "Prior art" is defined in Section 24.1 of the IP Code as consisting of "everything which has been 
made available to the public anywhere in the world, before  the filing date or the priority date of the Philippine 
application claiming the invention". 
120 IPO (undated b). 
121 The patent owner has no right to prevent, inter alia , the use of a patented product, which has been 
put on the domestic market;  the private or non-commercial use of such a product;  and the use of a product for experiments or for use in the medical profession and by pharmacies. 
122 Any person, who was using the invention prior to the filing date or priority date of the application 
when the patent was granted has the right to continue using it. 
123 Section 93 of the IP Code.  The Philippines also notified the Rules and Regulations on Inter Partes 
Proceedings, which regulates the petitions  for cancellation of a mark, patent, u tility model, industrial design, for 
opposition to registration of a mark, and for com pulsory licensing (WTO document IP/N/1/PHL/I/4, 
1 August 2001). WT/TPR/S/149 Trade Policy Review 
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the patented invention on reasonable commercial terms.124  According to the authorities, the IPO has 
granted two compulsory licences since 1999, both regarding pharmaceuticals. 
130. Infringement of patents constitutes a civil offe nce;  administrative and civil cases may be 
filed.  However, the repetition of the offence cons titutes a criminal action.  Upon conviction, at the 
discretion of the court, an infringer may be impris oned for six months to three years and/or fined 
PhP100,000 to PhP300,000. 
(c) Utility models, industrial d esigns and layout designs 
131. There have been no substantial changes to the legislation regarding utility models and 
industrial designs since 1999.125  Under the IP Code, an invention qualifies for registration as a utility 
model if it is new and industrially applicable;  and an industrial design may be registered if it is new 
or original.   
132. Registration with the Bureau of Patents re mains necessary to protect utility models and 
industrial designs.  The protection granted is simila r to that granted to other inventions through a 
patent.  The application for registration must be published in the IPO Gazette .  A formality 
examination is conducted prior to registration.  A u tility model registration expires, without possibility 
of renewal, at the end of seven years after the date of the filing of the application.  Registration of an 
industrial design is for a period of five years from the filing date of the application, and may be 
renewed for two consecutive periods of five years. 
133. A layout-design of integrated circuits must also be registered at the IPO Bureau of Patents to 
be protected;  only original layout-designs may be re gistered.  The right of registration belongs to the 
creator and his/her heirs, or to those designated by the creator.  As in the case of patents, the first to 
file rule applies.  The Director of the Bureau  has ten days from the filing date to refuse the 
application.  If it is not refused, the application has to be published in the  IPO Gazette .  Any interested 
party may oppose the application on grounds of non-originality or that the application has not been filed within two years from its first commerc ial exploitation anywhere in the world. 
134. Protection is granted to layout-designs for a non -renewable period of ten years from the date 
of the first commercial exploitation, anywhere in the world, or from the filing date of the application, 
if the layout has not been previously exploited.  Any interested party may petition for the cancellation 
of the registration of a layout-design on the following grounds:  that it is not protectable, that the right holder is not entitled to protection, or that the app lication was not filed within two years from first 
commercial exploitation anywhere in the world.  A re gistered layout-design may also be the subject of 
a petition for compulsory licensing. 
(d) Trade marks 
135. A trade mark must be registered either in the Philippines or abroad to be protected (a foreign 
trade mark owner may claim priority filing date).  Th e Code defines the marks that can be registered.  
They include goods and services marks, trade na mes or business names, and collective marks.
 126  The 
                                                      
124 IPO (undated c).  The Rules and Regulations on Voluntary Licensing were notified to the WTO on 
2001 (WTO Document IP/N/1/PHL/C/2-IP/N/1/PHL/I/2, 15 June 2001). 
125 Act Providing for the Protection of Layout-Designs (Topographies) of Integrated Circuits (Republic 
Act No. 9150), and the Layout-Design Regulations (WTO document IP/N/1/PHL/L/I, 3 February 2003).  
126 Trade names are protected, even prior to or without registration, against any unlawful act committed 
by third parties. The Philippines WT/TPR/S/149 
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IP Code protects designations of origin as a trade ma rk.  It prohibits the use of any false or misleading 
designation of origin and the importation of any good that is marked or labelled in such a way.  
136. Applications for registration of a trade mark are filed with the Bureau of Trademarks (BOT) 
of the IPO.  Upon receipt of an application, the examiner undertakes a formal examination, which is 
needed for the grant of a filing date;  a substantiv e examination is also required, to ascertain the 
distinctiveness and registrability of the mark.  If the examiner finds no reasons to refuse the 
application, the trade mark is registered.  The application is then published in the IPO Gazette  to give 
the public a chance to oppose it.  A declaration of actual use of the mark is required otherwise the 
application may be refused or the mark could be removed from the Register, if already registered.127  
All registered trade marks are published.   
137. Protection of a trade mark is granted for ten years;  registration may be renewed (for an 
unlimited number of times) for periods of ten years.  The owner of a mark has the exclusive right to 
prevent third parties from using identical or similar si gns when such use results in confusion.  A mark 
may be transferred with or without the transfer of the business using the mark.  Marks, with the 
exception of collective marks, may also be subject to licensing contracts.  Petitions to cancel a mark 
may be filed with the Bureau of Legal Affairs by  any person who believes that he is, or will be, 
damaged by the registration of a mark.  Since 1999, 42 trademarks have been cancelled.  
138. In cases of trade mark infringement, the courts may award damages, impose a penalty of 
imprisonment from two to five years, and/or a fine ranging from PhP50,000 to PhP200,000. 
(e) Copyright and related rights 
139. The IP Code protects literary and artistic  works, which include audiovisual and 
cinematographic works, computer programs, deriva tive works, and neighbouring rights.  These works 
do not require registration to be granted protection;  copyright exists from the moment of creation.  
However, the deposit of literary and artistic works at the National Library and or the Library of the 
Supreme Court is required to complete these librari es' records.  The law stipulates the authors, 
performers, producers, and broadcasters economic and mo ral rights, and their limitations to use them.  
Terms of protection have not changed during the pe riod under review;  they vary according to the 
protected item. 
140. The Philippines does not seem to provide natio nal treatment regarding the granting of 
copyright.  Copyright is granted if the work was fi rst published in the Philippines or first published in 
another country but published within thirty days in the Philippines, if the author was a national or if 
producers of audiovisual work have their headquart ers or habitual residence in the Philippines.  
Protection is granted to national performers;  forei gn nationals are protected only if performing in the 
Philippines or if their performance is incorporated in a sound recording that is protected by the Code 
or the sound is carried by a broadcast protected under the Code.  Protection for sound recordings is 
granted if produced by nationals and first published in the Philippines.  The provisions of the Code 
apply to broadcasts made by broadcasting organi zations whose headquarters are situated in the 
Philippines;  and broadcasts via transmitters situat ed in the Philippines.  National treatment is 
provided to performers,  producers of sound recordi ngs, and broadcasting organi zations, by virtue of 
international conventions or other international agreements to which the Philippines is a party (Berne 
Convention, Rome Convention, and the WI PO Performances and Phonograms Treaty). 
                                                      
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141. Infringement of a copyright is considered a crim e punishable by fines and imprisonment.  In 
general, the punishment depends upon the number of times the offence is committed.128  However, in 
determining the number of years of imprisonment and the fines, the court will also consider the value 
of the infringing materials that the defendant has produced or manufactured and the damage suffered 
by the copyright owner. 
(f) Plant varieties 
142. In 2002, the Philippines enacted legi slation to protect plant varieties.129  New plant varieties 
may be protected if they have been exploited in th e Philippines for more than a year prior to the date 
of filing an application, or if they have been e xploited in another country (where the application has 
been filed) for more than four years or, in the case of vines and trees, for more than six years prior to 
the filing date.  According to the law, a plant is not considered new if it has been in the market 
five years prior to the approval of the Act. 
143. Any breeder may apply for a Certificate of Plan t Variety Protection.  As in the case of the 
application for a patent, the first to file and the pr iority date rules apply.  Applications are first 
examined to see if all the required information and ma terials have been submitted;  a filing date is 
then accorded and the application is published in the Plant Variety Gazette .  A Certificate of Plant 
Variety is issued once the National Plant Variet y Protection Board has tested and examined the 
variety.  Trees and vines are protected for 25 years from the date of grant of the Certificate while other types of plants are granted protection for 20 years.  If an application is rejected the Board 
informs the applicant;  however, the Board's decisi on is final, and in general, the applicant has no 
possibility of appeal.  
144. Holders of certificates have the right to, inter alia , produce and reproduce, propagate, sell, 
export, import, and stock plants.  The holder's rights extend to:  any varieties that are derived from the 
protected variety;  varieties that are not distinct from the protected varieties;  and varieties whose production requires the repeated use of the protected va riety.  The Act stipulates exceptions to holders' 
rights when  the variety is used for non-commercial or experimental purposes, to breed other distinct 
varieties, and for use by small farmers.  Co mpulsory licences may be granted under specific 
conditions and plant variety prot ection may be cancelled on specific grounds.  The Board has the 
jurisdiction to issue compulsory licences and to cancel certificates.  The Board's decision to cancel a 
certificate may be appealed. 
145. Infringers of property rights ma y be imprisoned for three to six years and/or fined at least 
PhP100,000 or up to three times the profit derived from the infringement.  
(g) Enforcement 
146. The institutions in charge of enforcing intellect ual property rights in the Philippines are IPO, 
the Customs Department, the Philippine National Poli ce (PNP), the National Bureau of Investigation 
(NBI), the Department of Justice (DOJ), and the Optical Media Board (OMB), which replaced the 
Videogram Regulatory Board (covering piracy invol ving cinematographic works).  The OMB is in 
                                                     
 
128 For the first offence, the penalty is a fine of PhP50,000 to PhP150,000 and one to three years 
imprisonment;  for the second, the penalty is PhP150,000 to PhP500,000 fine and three to six years 
imprisonment;  and for the third and/or subsequent of fences, the penalty is a fine of PhP500,000 to 
PhP1.5 million and/or six to nine years imprisonment.  Subsidiary imprisonment is required in all instances in 
cases of insolvency. 
129 An Act to Provide Protection to New Plant Varieties, Establishing a National Plant Variety 
Protection Board and for other Purposes (Republic act No. 9168), 7 June 2002.    The Philippines WT/TPR/S/149 
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charge of licensing importers, expor ters, merchants, distributors, and manufacturers of optical media 
or operators of manufacturing equipment to produce or replicate optical media.130  The IPO is in 
charge of coordinating IPR enforcement efforts;  how ever, its ability to do so seems to be limited.  To 
strengthen its coordination function, the IPO conve ned the Intellectual Property Rights Enforcement 
Action Panel (IP-REAP) in 2002.  The Panel is a joint government and private sector body established 
to provide coordination and cooperation among the va rious government enforcement agencies and the 
private sector.  In addition, the Intellectual Propert y Enforcement Service (IPES) was created to focus 
on the coordination and implementation of IP-REAP’s projects.131 
147. In 2001, the Philippines provided responses to  the WTO checklist of issues on enforcement.132  
The Philippines seems to have made some efforts to improve enforcement of intellectual property 
rights.  For example, Customs created a permanent IPR unit in September 2003 to investigate all shipments of counterfeit and pirated goods
133, and new laws were enacted to protect plant varieties 
and regulate the trade and production of optical disks.   Nevertheless, enforcem ent remains lax.  Many 
enforcement agencies suffer from a lack of res ources while IPR issues remain a relatively low 
priority.  There is a lack of trained personnel and interagency coordination, and a growing backlog of 
cases in the judicial system.134  Enforcement efforts such as raids and seizures often have only a 
temporary effect due to ineffective post-raid enforcement. 
148. It is difficult to assess the enfo rcement efforts undertaken by the Philippines (Table III.8).  
The number of items (e.g. CDs, DVDs, VHS tapes, CD burners and replicating machines) confiscated 
since 1999 has declined substantially, especially in  2004;  this could be due to reduced IPR 
infringements, as suggested by authorities, or a lack of enforcement efforts.   
149. The IP Code does not expressly pr ohibit or allow parallel imports.  The authorities could not 
clarify whether parallel imports were allowed into the Philippines. 
Table III.8 
Intellectual property enforcement, 1999 to June 2004 
('000 and PhP'000) 
Items confiscated (including CDs, DVDs, VHS tapes, CD burners and replicating machines) 
Agencies 
1999 2000 2001 2002 2003 2004 Total 
NBI-IPRD 59.7 656.5 4,608.5 - - - 5,324.7 
PNP-CIDG 56.3 16.1 196.8 - 439.1 26.7 735.1 
VRB/OMB 424.9 722.1 402.6 6,048.3 2,734.0 308.7 10,640.6 
BOC 3,258.9 31.4 79.8 - 219.0 4.9 3,594.1 
Table III.8 (cont'd) 
                                                      
130 Optical Media Act of 2003. 
131 Office Order No. 103, 27 October 2003. 
132 WTO document IP/N/6/PHL/1, 23 April 2001. 
133 The Bureau of Customs conducts random checks on imports to determine whether the goods match 
the description in the shipping documentation and are not otherwise infringing.  Customs may seize imports that violate the law.  Imports excluded fr om seizure are copyright works not exceed ing one copy for an individual, or 
three copies for persons or family arriving from foreign countries. 
134 IPO/IP-REAP has initiated several capacity-building projects.  These include training:  on product 
familiarization of frequently infringed products;  on enforcement of cyber crimes;  of the Special Task Force of 
Prosecutors designated to handle IP cases;  of the judges of the 65 special commercial courts designated to 
handle IP cases;  and of enforcement officers on best practices in investigation and prosecution of IP cases.  The IPO is also advocating formation of  a special division in the Court of Appeals to handle IP cases. WT/TPR/S/149 Trade Policy Review 
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Items confiscated (including CDs, DVDs, VHS tapes, CD burners and replicating machines) 
Agencies 
1999 2000 2001 2002 2003 2004 Total 
DTI-BTRCP 1.0 - - - - - 1.1 
EIIB 714.1 - - - - - 714.1 
Total number 4,515.0 1,426.1 5,287.7 6,048.3 3,392.2 340.4 21,009.7 
NBI-IPRD 21,006.5 211,347.5 475,598.9 399,993.2 487,867.1 90,230.0 1,686,043.2 
PNP-CIDG 4,934.6 1,532.1 2,219.6 703,970.2 17,162.4 775.9 730,594.9 
VRB/OMB 67,247.5 55,776.4 40,257.9 604,835.5 252,984.6 15,436.0 1,036,538.0 
BOC 146,939.1 7,102.2 35,449.2 8,547.2 4,178.5 - 202,216.3 
DTI-BTRCP 21.8 367.9 - - - - 389.7 
EIIB 44,987.5 - - - - - 44,9875 
Total value 285,137.0 276,126.2 553,525.5 1,717,346.2 762,192.6 105,341.9 3,700,769.6 
Note: NBI-IPRD - National Bur eau of Investigation-Intellectual Property Rights Division 
PNP-CIDG - Philippine National Police-Crim inal Investigation & Detection Group 
VRB/OMB - Videogram Regulatory Board/Optical Media Board BOC - Bureau of Customs 
DTI-BTRCP - Department of Trade and Industry-Bu reau of Trade Regulati on & Consumer Protection 
 EIIB - Economic Intelligen ce & Investigation Bureau. 
Source:  Government of the Philippines.